Eurozone ministers prepare for clash on Italian budget

Markit IHSItalian manufacturing isn’t what it used to

Markit IHSItalian manufacturing isn’t what it used to

Eurozone finance ministers are meeting for the first time since the European Commission rejected Rome's 2019 budget in a historic move.

In the case of non-compliance of the European Commission Brussels can apply for a Rome in the court, and in the future - to enter against Italy financial sanctions.

"Everyone is anxious", a senior European Union official said, as several sources told AFP most of the 19 ministers would back the European Commission's tough stance.

"If the recipe works here, it will be said at a European level: "We should apply the recipe of Italy to all other countries", Di Maio told The Financial Times.

Rome remains committed to reduce its debt ratio and hopes to reach a compromise with the European Commission, Finance Minister Giovanni Tria told his peers at the Eurogroup, according to an Italian government official.

European Commissioner for Economy and Finance Pierre Moscovici that the cost of servicing Italian public debt is already equal to the country's entire spending on education - €65 billion a year, before adding that the Commission and the Italian government are not now involved in negotiations on a compromise regarding a revised budget. "Italy's budget is substantially deviating from the requirements so it would also require substantial adjustment", he said.

The finance ministers released their statement on Italy, saying: "We agree with the commission assessment", and that "the focus on sufficient debt reduction and the path to the medium-term budgetary objective are an integral part of the stability and growth pact".

"If you share a currency with many other countries, we all have responsibilities to each other and those responsibilities are now articulated in the rules that the European Commission oversees", Mr Donohoe told reporters on entering.

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"On Nov. 19 we'll hold an extraordinary Eurogroup here in Brussels and this meeting will be mostly dedicated to euro-area reform", Eurogroup President Mario Centeno tells reporters after the meeting.

Rome's budget draft is considered by Brussels to be in breach of European Union fiscal rules and needs to be revised by November 13.

The target deficit of 2.4 percent of GDP proposed by the Italian government is under the 3-percent threshold expected by Brussels. "Italy will never kneel again".

"I favour a policy that is growth-friendly in Italy".

The coalition's 2019 budget is based on an estimate of annual growth of 1.5 percent - a figure considered optimistic by the International Monetary Fund, which has forecast only one percent.

Italy already owes 2.3 trillion euros ($2.6 trillion), a sum equivalent to 131 percent of its GDP, and even if Brussels fails to punish Rome, many assume the markets will.

Rating agency Moody's has already downgraded Italian debt, and Standard & Poor's has dropped its outlook from stable to negative.

The much watched "spread" - the gap between German and Italian bond yields - has grown to around 300 basis points, up from around 130 in the first quarter of 2018.

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