November 28, 2018 / 10:02 AM / 15 days ago

Italian budget needs 'substantial correction' - EU's Dombrovskis

European Commission Vice-President Valdis Dombrovskis attends a news conference in Brussels, Belgium, November 21, 2018. REUTERS/Yves Herman

MILAN/BERLIN (Reuters) - Italy needs to make a “substantial correction” to its draft budget for 2019, EU commissioner Valdis Dombrovskis told Italy’s La Stampa and German daily Handelsblatt.

Handelsblatt also quoted unnamed EU sources saying the European Commission could trigger proceedings against Italy over its budget before Christmas, possibly on Dec. 19. There was no immediate comment from the Commission.

The European Commission has rejected Rome’s expansionary 2019 budget because it reverses a commitment to reduce borrowing made by the previous government.

Rome has set a deficit target of 2.4 percent of gross domestic product next year to help fund its welfare spending programme.

Asked if cutting the deficit target by 0.2 percent would be enough Dombrovskis told La Stampa: “It certainly doesn’t seem to be so”.

In the interview published on Wednesday, he said the government’s budget plans had already hurt the economy by raising borrowing costs. “These economic developments also hurt the banking system,” he said.

The Italian government said on Monday it was sticking to its main 2019 budget goals for now as it awaits a cost analysis of its main spending measures, but left open the possibility of eventually cutting its deficit target.

Reporting by Tassilo Hummel and Stephen Jewkes; editing by Thomas Seythal and Andrew Heavens

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