FRANKFURT, Oct 25 (Reuters) - European Central Bank President Mario Draghi said on Thursday that he was confident Italy and the European Commission would resolve their standoff over Rome’s budget plans for 2019.
The European Commission rejected Italy’s draft 2019 budget this week, saying it brazenly broke EU rules on public spending, and asked Rome to submit a new one within three weeks or face disciplinary action.
Draghi said the ECB had not examined the issue at length at its policy-setting meeting that ended on Thursday as it is not a monetary policy matter.
But he quoted European Commission Vice President Valdis Dombrovskis, who was also at the ECB meeting, as saying: “We have to observe and apply fiscal rules. But we are also seeking a dialogue.”
Draghi said he personally believed the two sides would resolve the matter.
“I’m confident that an agreement will be found,” he said.
Borrowing costs for the Italian government have been hovering near 4-1/2 year highs as investors fear a showdown between Rome and European authorities that could ultimately raise questions about Italy’s membership of the euro.
Draghi said that while there may be some spillover to other bond markets from Italy’s problems, any impact was limited.
Sources have told Reuters Italy would need to secure a bailout from European institutions, which comes with strict policy conditions, if it was to receive any help from the ECB. (Reporting By Francesco Canepa; Editing by Hugh Lawson)