December 14, 2018 / 10:24 AM / 8 months ago

Italy's Conte seeks EU leaders' backing on revised budget

BRUSSELS (Reuters) - Prime Minister Giuseppe Conte sought to convince European Union leaders on Friday that his offer to cut Italy’s deficit target for next year should make an EU disciplinary procedure unnecessary.

Italian Prime Minister Giuseppe Conte attends a European Union leaders summit in Brussels, Belgium December 14, 2018. REUTERS/Francois Lenoir/Pool

Conte has said he is ready to cut the headline deficit to 2.04 percent of output from 2.40 percent, and hopes to reach agreement with the EU executive, the Commission, on Monday.

Conte met German Chancellor Angela Merkel on Friday on the sidelines of the EU summit in Brussels, officials said, and was trying to arrange to meet Dutch Prime Minister Mark Rutte, one of the harshest critics of Italy’s expansionary budget.

The Commission insists that Italy must reduce its structural deficit, which excludes one-offs and business cycle swings, to shrink a debt burden equivalent to more than 130 percent of GDP. EU officials have said this would limit the headline deficit to 1.9 percent of output.

EU states have the last say on opening any disciplinary procedure but European diplomats said euro zone countries, including Germany, were ready to leave it to the Commission to negotiate, and would accept whatever outcome was agreed.

At the same time, Italy’s readiness to revise its spending plans, and emerging budget problems in France, have created a more conciliatory atmosphere.

On Thursday, Conte met Portuguese Prime Minister Antonio Costa, whose finance minister, Mario Centeno, chairs the euro zone finance ministers’ committee where key decisions for the euro zone are made.

Also on Thursday, EU Economics Commissioner Pierre Moscovici said Italy’s new offer showed a “significant effort”, and that Rome and Brussels were working to find a compromise quickly on remaining “technical” issues.

Italian Finance Minister Giovanni Tria was in Brussels on Friday and planned to stay until a deal was reached, his spokeswoman said.

If the Commission moved ahead with a disciplinary procedure, it could put pressure on the value of Italy’s sovereign bonds and expose it to prolonged market pressure.

Additional reporting by Jan Strupczewski; Writing by Francesco Guarascio; Editing by Kevin Liffey

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