UPDATE - Italian Draft Budget For 2019 Flouts EU Financial Stability Rules - Commissioner

UPDATE - Italian Draft Budget for 2019 Flouts EU Financial Stability Rules - Commissioner

BRUSSELS (UrduPoint News / Sputnik - 21st November, 2018) Italy's budget plan is in breach of EU's fiscal regulations and puts the country's economy at risk of instability, the EU commissioner in charge of financial stability said Wednesday.

The European Commission recommended in July that Italy cut its structural deficit by 0.6 percent of domestic output in 2019. Instead the deficit is set to grow by around 1 percent of GDP.

"Italy's draft budgetary plan is in a particularly serious noncompliance with the Council's recommendation," Valdis Dombrovskis told reporters.

Italy's plans for extra borrowing instead of fiscal prudence are of common concern to all euro area countries, which must all play by the same rules, he said.

"With what the Italian government has put on the table, we see a risk of the country sleepwalking into instability," he warned.

The draft budget, the commissioner predicted, would have a negative impact on growth, reduce the banks' ability to lend and keep the economy vulnerable to shocks.

"We cannot see how perpetuating this vulnerability will increase economic serenity. Instead, I believe it could result in more austerity down the road," the official said.

Dombrovskis stressed, however, that the Commission had not closed the door on Italy and would try to avert instability in the euro area's third largest economy.

"We stand ready for a dialogue with the Italian authorities, but we think that this situation needs to be addressed," he concluded.

The European Commission predicts that Italy's debt will remain at around 131 percent of GDP in the next two years. That is an average of 37,000 Euros ($42,000) in debt and 1,000 euros in debt servicing costs per inhabitant per year.