January 26, 2018 / 3:13 PM / 24 days ago

Italy's 5-Star says would respect EU's three percent deficit limit

ROME (Reuters) - The anti-establishment 5-Star Movement said on Friday that if it wins power at Italy’s March 4 election it will respect the European Union’s budget deficit limit of 3 percent of gross domestic product, reversing an earlier stance.

5-Star’s leader Luigi Di Maio had repeatedly said the party would exceed the 3 percent limit to fund public investments.

Five-star said on its website that even with 10-15 billion euros of deficit spending per year, it would remain “comfortably below the antiquated and stupid 3 percent level”.

A 5-Star spokesman confirmed this meant they no longer planned to exceed 3 percent.

5-Star is Italy’s most popular party, according to opinion polls, but it is not expected to win enough seats to form a government alone.

The maverick party has steadily moved away from unorthodox economic positions in a bid to reassure investors and Italy’s partners that it can be trusted with power.

Di Maio had already backtracked on a pledge to hold a referendum on Italy’s membership of the euro zone.

The latest shift on the deficit brings 5-Star broadly into line with the positions of two of its main rivals at the election.

Centre-right leader Silvio Berlusconi and Matteo Renzi, leader of the ruling Democratic Party, have both said they would not exceed the 3 percent limit, but Renzi has said he wants to raise it to 2.9 percent for the next five years.

However, the EU’s Stability Pact does not only require Italy to hold the deficit below 3 percent, but to reduce it steadily towards a balanced budget.

The outgoing centre-left government has targeted the deficit to fall from 2.1 percent in 2017 to 1.6 percent this year and 0.9 percent in 2019.

The European Commission says even these objectives are not ambitious enough in view of Italy’s huge public debt - the highest in the euro zone after Greece’s - and says supplementary deficit cuts may be needed for this year.

5-Star leads the polls with around 28 percent of voting support, 5 points ahead of the PD.

A centre-right alliance of smaller parties, led by Berlusconi’s Forza Italia (Go Italy!) totals about 37 percent and is seen winning most seats but probably not enough for a working majority, meaning a hung parliament looks likely.

Reporting by Gavin Jones; Editing by Alison Williams

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