Accusing it of sloppy and outdated analysis, the European Commission has criticised Italy’s budget for 2019.
Shortly after the European Commission published its latest forecasts for Italy, most of which were more pessimistic than the government’s, Finance Minister Giovanni Tria said the numbers come from an “inadequate and partial analysis.” He added that the EU ignored “clarifications provided by Italy.”
As reported by Bloomberg, Rome’s unusually strong response included another refusal to change its budget targets, despite demands from the EU.
Tria reiterated that the government is committed to maintaining its “maximum deficit” target at 2.4% of economic output. The commission has rejected that as being too expansive, while predicting the actual 2019 gap will be even wider at 2.9%, close to the EU’s 3% limit.
After the report, Italian bonds slipped, pushing the 10-year yield up seven basis points to 3.41 percent. The spread over German bunds widened, though remained below recent highs.
While the EU’s forecast language is gloomy, some say the reality may turn out to be worse. Lorenzo Codogno, a former chief economist at the Italian finance ministry, said Europe’s predictions “look too optimistic.”
In the report, the European Commission forecasts economic growth of 1.2% next year, below the populist government’s target of 1.5%. Budget deficit seen widening to 2.9% next year and 3.1% the following year.
