Economy 09-11-2018

Di Maio "guarantees" that Italy will remain within the euro

Italian Deputy Prime Minister Luigi Di Maio "guaranteed" this Friday to foreign correspondents in Rome that Italy will remain within the euro and defended the budget law for 2019, rejected by the European Commission.

Italy "will not leave the euro zone, I guarantee it as deputy prime minister of the government," said Di Maio, leader of the anti-system formation Movimiento 5 Estrellas (M5E), at a press conference held at the foreign press headquarters.

"I have designed my role as a political leader on the fact that we should not leave the euro and this not only guarantees it as a leader of the 5 Star Movement but I say it on behalf of the government, as vice-prime minister," he added.

"Times have changed, and over the past year there has been growing confidence in the idea of remaining in the euro zone," said Di Maio, an ally since June to govern with the ultra-right-wing Liga.

Di Maio defended the project of budgets for 2019, rejected by the European Commission that foresees a deficit of 2.4% of the Gross Domestic Product (GDP) for 2019.

The European Commission lowered the optimistic economic forecasts of the Italian populist government on Thursday, while the IMF warned of a possible "contagion" of turbulence in Italy to other European countries.

Italy built its budget on a very optimistic growth forecast of 1.5% in 2019, when the Commission anticipates growth of 1.2% for next year and 1.3% in 2020.

The Commission forecasts that the deficit will reach 2.9% next year and will exceed 3% in the coming years.

"Honestly, I want to explain to the Commission that the figure of 2.4% is the maximum limit," said Di Maio.

- Question of calculation -

The Italian Economy Minister, Giovanni Tria, accused the European Commission of miscalculating the deficit forecasts for Italy.

"We note a technical failure of the Commission, which does not affect the constructive dialogue that the Italian government has insisted on maintaining," said Tria.

The populist government, "a term that does not bother me," acknowledged Di Maio, believes that the new budgets will allow to reactivate economic growth.

"We must get out of the trap generated by weak growth," Tria warned on Friday before a parliamentary committee.

The minister believes that despite the economic slowdown in the third quarter, GDP growth will be 1.5% for next year, a figure considered very optimistic by Brussels, where it is expected to be 1.2%.

Tria said that the additional spending stipulated in the budgets for 2019 will generate a growth increase of 0.6%, a "prudent" estimate, he said.

Italy has until November 13 to submit a revised budget to the EU. If it does not change its policies, Rome is exposed to the beginning of an "excessive deficit procedure" and, in the long term, to possible economic sanctions.

"I do not think we'll get there," Di Maio said, pointing to "the dialogue with Brussels."

Financial markets are concerned about Italy's rising deficit, whose debt reached 130% of GDP, the highest level in the euro area after Greece.

The differential, the narrowly monitored gap between German and Italian interest rates, "will go down when we have drafted the rules" contained in the draft budgets, said Di Maio.


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