News Analysis: Italy looks to avoid budget fines, concrete action needed

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by Eric J. Lyman

ROME, June 20 (Xinhua) -- Italy's Prime Minister Giuseppe Conte this week made his case for why Italy should avoid becoming the first European Union member state to be fined by the European Commission for high debt levels.

But analysts said the commissioners will be looking for concrete acts more than verbal promises.

Conte sent his formal response to the European Union on Wednesday. Conte's six-page letter promised a "constructive dialogue" with commissioners. He said Italy was not seeking special favors from the commission and he expressed confidence that the country's policies have it headed in the right direction.

"With regard to the disciplinary procedure, we are all determined to avoid it, yet we are also firmly convinced about our economic policies," Conte said in a parliamentary address Wednesday, after delivery of his letter to the European Commission. Conte also said it was "incomprehensible" that the commission would seek to punish Italy's efforts to spark economic growth.

Conte said Italy would reduce the country's structural deficit by 0.2 percentage points next year, but Conte's promises were void of specific details on how the 2020 budget would tamp down debt.

According to Italian media reports, Conte and Finance Minister Giovanni Tria were blocked from including specifics by deputy prime ministers Matteo Salvini and Luigi Di Maio, who were keen to avoid any talk of their signature programs being reduced.

Salvini, head of the nationalist, euro-skeptic League, wants to put a flat tax into place, while Di Maio, leader of the populist Five-Star Movement, is seeking to protect his minimum citizen's income plan. Salvini and Di Maio both say their programs will help create economic growth even though most economists have said the plans were likely to add to the country's budget deficit.

"Conte said the kind of things that under other circumstances would calm some worries in Brussels," Javier Noriega, an economist with Hildebrant and Ferrar in Milan, told Xinhua. "But the Conte government has promised and not delivered in the past. I think the commission will want to see specific actions."

Noriega went on: "This is like a [soccer] coach who promises victory before the game," he said. "It's good that the coach is confident, but I think everyone will want to see the result of the game before declaring the team as the champion."

Italy's national debt is equivalent to nearly 133 percent of the country's gross domestic product, the second highest level in the 28-nation European Union only after Greece, and far above the 60-percent limit for members of the euro zone. That could put Italy in line for fines of up to 3.5 billion euros (3.9 billion U.S. dollars) if the country is deemed to be doing too little to reduce debt levels. If Italy is actually fined it would be the first time a European Union member state was fined for its debt problems.

Giampaolo Galli, an economist and vice-director of the Italian Observatory of Public Accounts, said Conte's remarks would not resolve the issue on their own but that could be seen as a roadmap for Italy to follow.

"Going forward in the coming months toward the negotiations for the 2020 budget, if Italy manages to follow the path Conte laid out then things will be fine," Galli said in an interview. "How possible is that? That's the big question." Enditem

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