September 28, 2018 / 7:32 AM / in 22 days

UPDATE 1-EU's Moscovici says it is in Italy's interest to respect budget rules

* Italy defies Brussels with latest budget

* Moscovici: in Italy’s interest to respect rules

* Italy’s debt remains “explosive”, says Moscovici (Adds details)

PARIS, Sept 28 (Reuters) - There is nothing to be gained from a showdown with Italy over its budget targets but Rome has every interest in respecting EU fiscal rules, EU Economic Commissioner Pierre Moscovici said on Friday.

On Thursday, Italy’s populist-led government targeted a budget deficit at 2.4 percent of economic output for the next three years, defying Brussels and marking a victory for party chiefs over economy minister Giovanni Tria.

“We have no interest in a crisis between the Commission and Italy, it is in nobody’s interest because Italy is a an important euro zone country,” Moscovici said on France’s BFM TV.

“But we don’t have any interest either that Italy does not respect the rules and does not reduce its debt, which remains explosive,” he added.

Tria, an unaffiliated technocrat, had initially sought a deficit as low as 1.6 percent next year, which would allow Italy to respect EU demands to reduce its fiscal shortfall progressively and cut the country’s huge debt burden.

Moscovici said sanctions were in theory possible if the budget was found to be flaunting EU rules, although he added he was not generally in favour of using them.

The commissioner is to discuss the budget with Italian officials starting on Monday when euro zone finance ministers meet, although a response to Rome’s budget targets could come before mid October, he added. (Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta)

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