Eurozone finance ministers hopeful Italy will choose ‘the wise path’ and revise budget
Eurozone finance ministers remained hopeful that Italy would choose the “wise path” and revise its draft budget plan despite Rome's tough stance, ahead of a meeting on Monday.
The European Commission rejected Italy's free-spending draft budget last month and ordered the Government to submit a revised plan by 13 November.
Publicly the Italian Government has robustly defended its expansive budget plan – running a deficit of 2.4 per cent of GDP for the next three years – leading to suggestions the commission could bring forward disciplinary measures.
The EU's economic and financial affairs commissioner Pierre Moscovici refuted reports that a decision had already been made to discipline Italy over its debt as early as 21 November.
He said it would hinge on whether the country chooses to make changes to its plan.
Speaking ahead of the Eurogroup meeting, French finance minister Bruno Le Maire said there was room for compromise between Italy and the commission.
He said: “There is a hand offered by the commission and Italy would be wise to seize that hand.
“I really hope the Italian government do as I think the wise path is a path of dialogue and an exchange of views.”
But Moscovici said it was not about compromise and the commission's job was to make sure the rules were followed.
Finance ministers met on Monday to discuss a number of issues, most notably Italy's draft budget.
Eurogroup President Mario Centeno said: “We are in the process of getting a response from the Italian government and are looking forward to a very constructive discussion and debate.
“Hopefully we will get a new draft budget plan and come back to this in December."
Italian Government bond yields rose five to 10 basis points on Monday ahead of the meeting.
Two-year Italian bond yields were 12 basis points higher to 1.19 percent, while 10-year bond yields rose five bps.
The commission's vice-president for euro dialogue Valdis Dombrovskis said: “We are trying to convince the Italian authorities that the approach they are taking is counter-productive for the Italian economy.
“Interest rates have substantially increased on its sovereign debt and that's trickling down to the real economy, to the companies and the consumers.
“At the end of the day this fiscal stimulus may not materialise and Italy's economy could slow even further.”
Italian banks also suffered on Monday after Goldman Sachs downgraded the country's top retail bank Intesa SanPaolo and its smaller peer BPER Banca to “sell”.