October 30, 2017 / 7:11 PM / a year ago

Italy defends 2018 budget after EU Commission warning

FILE PHOTO: Italy's Economy Minister Pier Carlo Padoan attends a news conference at Chigi Palace in Rome, Italy, June 25, 2017. REUTERS/Alessandro BianchI/File Photo

ROME (Reuters) - Italy defended its 2018 budget in a letter to the European Commission on Monday, saying Brussels did not recognise the extent of its efforts because it used different calculations.

The EU executive said last week that the structural adjustment planned by Italy, which has the euro zone’s second-highest public debt burden relative to its output, was below what is required.

Italy pledged to cut its structural deficit by 0.3 percent of gross domestic product this year, but the Commission said its latest fiscal package showed a cut of just 0.2 percent.

Economy Minister Pier Carlo Padoan disputed this in the letter sent to Commission Vice President Valdis Dombrovskis and Economic and Financial Affairs Commissioner Pierre Moscovici.

“The difference of 0.1 percentage point in the estimated fiscal effort for 2018 according to the Commission’s estimates is due to a different assessment of the cyclical conditions of Italy, that is, to the ... output gap estimate.”

Housing migrants who have poured across the Mediterranean from Libya in recent years requires extra spending despite a reduction in new arrivals, Padoan said, forecasting the cost of its location on Europe’s southern frontier would cost Italy “a significant burden over time of at least 0.25 percent of GDP”.

There were more than 193,000 people living in migrant reception facilities across the country at the end of September 2017, compared with 176,000 at the end of 2016, the letter said.

Reporting by Isla Binnie; editing by Ralph Boulton

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