International Monetary Fund issues fresh warning to Italy over spending
The head of the International Monetary Fund's (IMF) European department has warned Italy to respect EU budget rules.
Poul Thomsen said that the Italian Government should not target an increase in its budget deficit next year, a move that would breach EU spending rules.
Read more: Italy fears subside as government reportedly plans to cut debt
The coalition government, which took power in June, is planning to triple to previous administrations goal and is targeting a headline gap of 2.4 per cent, which would increase the structural deficit to 0.8 per cent of GDP.
“We still project relatively strong growth in Italy next year. This is not the time to relax fiscal policy, this is the time to have some fiscal structural adjustment,” Thomsen said, according to Reuters.
“A fiscal relaxation of that magnitude… is not correct. The market reaction has been quite unfavourable and that illustrates the point about fiscal space,” Thomsen added at an annual IMF press conference.
Read more: Italy’s stock market could force its populist politicians to change course