ROME (Reuters) – Italy’s economy minister is looking to revise down the budget’s growth forecast for next year to try to reach a deal with the European Commission over fiscal policy, a government source said on Sunday.
The Commission rejected Italy’s fiscal plan for 2019 last month. The European Union’s executive said it flouted a commitment to lower the deficit and did not guarantee a reduction in the country’s debt, the second highest in the euro zone as a proportion of gross domestic product.
The Commission gave Rome until Tuesday to present a new budget and could start disciplinary steps against Rome later this month.
In its latest multi-year economic targets, in early October, Italy revised up its growth forecasts, with 2019 gross domestic product growth estimated at 1.5 percent.
Economy Minister Giovanni Tria said on Friday Italy stood by the main pillars of its budget.
The source said the Treasury could reduce its GDP estimate for next year to convince Brussels that Italy would not go above a deficit of 2.4 percent of GDP in 2019. The source did not give an exact figure.
La Repubblica earlier reported Tria was considering cutting the 2019 estimate for 2019 GDP growth to 1 percent and another newspaper, Il Messaggero, said he would cut the GDP forecast for next year to 1.2 percent.
The source said Tria was also looking at an automatic mechanism which would cut public expenses to keep the deficit below the set threshold.
The Commission said on Thursday Italy’s economy would grow more slowly in the next two years than Rome thinks, with GDP rising 1.2 percent in 2019 and making budget deficits higher than assumed.
In his comments on Friday, Tria said a sharp reduction in the government’s budget deficit, as demanded by the Commission, would be suicide for Italy’s economy.
He said the economic slowdown made an expansionary budget even more necessary.
(Reporting by Giulia Segreti and Giuseppe Fonte, Edting by Timothy Heritage, Crispian Balmer and Jane Merriman)