(Bloomberg) -- Italy’s populist government is fighting with Brussels to avoid sanctions over its contentious 2019 budget ahead of a year-end deadline to get the spending program through parliament.
Rome and Brussels are still up to 3 billion euros ($3.4 billion) apart, and divided on measures to bring down the structural deficit, Italian media reported after Prime Minister Giuseppe Conte summoned Finance Minister Giovanni Tria for urgent talks late Monday.
With Conte and Tria waging a long campaign to rein in euroskeptic Deputy Premiers Matteo Salvini and Luigi Di Maio, a revised budget bill has yet to be presented to the Rome Senate. The new package has to be approved by both houses by the end of the year. Missing the deadline would be a political embarrassment for an administration fighting for credibility and delay the delivery of its expensive election pledges.
‘Common Sense’
Italian bonds slipped amid reports the EU is questioning the nation’s deficit measures, with spreads on the 10-year benchmark versus German debt widening 2 basis points to 272 points.
“I hope Brussels will show common sense,” Salvini told Rete 4 television late Monday. “They count even the hair in Italy’s nostrils, and they let Macron’s France do whatever it wants.”
Salvini and Di Maio have repeatedly complained that the commission treats Italy and France differently, especially after the French President promised extra spending to try to defuse the Yellow Vest protests.
Salvini said Rome has done what the commission asked it to do: “If they ask us to cut again, no, that’s enough,” he said.
Salvini said the cost of lowering the retirement age, a key pledge for his anti-migration League, had been cut by 2 billion euros. Conte’s office has said the cost of a citizen’s income for the poor, sponsored by Di Maio’s anti-establishment Five Star Movement, has been cut by a similar amount.
Rome’s concessions so far may not be enough to ward off an excessive debt procedure by Brussels, with possible fines. The commission is seeking 2.5 billion to 3 billion euros of cuts in Italy’s structural balance, which strips out one-off expenditures and the effects of the economic cycle, according to newspaper Corriere della Sera.
The commission, whose senior officials could discuss Italy’s case at a meeting Wednesday, is divided on whether to start an infringement procedure, according to la Repubblica, with commissioner Valdis Dombrovskis taking a hawkish position, and his colleague Pierre Moscovici more conciliatory.