September 13, 2018 / 11:41 AM / a year ago

Italy's 5-Star keeps up pressure on economy minister over budget

ROME (Reuters) - The largest party in Italy’s governing coalition kept up pressure on Economy Minister Giovanni Tria on Thursday to boost spending in next year’s budget, as EU authorities advised the country to cut its debt.

FILE PHOTO: Italian Economy Minister Giovanni Tria attends as Prime Minister Giuseppe Conte (unseen) speaks during his first session at the Lower House of the Parliament in Rome, Italy, June 6, 2018. REUTERS/Tony Gentile/File Photo

The 5-Star Movement, which shares power with the far-right League, wants at least 10 billion euros ($11.6 billion) in spending to cover a universal income for the poor, a senior 5-Star source told Reuters on Wednesday.

That is in line with the party’s flagship promise made during campaigning for March national election.

But Tria, who is not a member of either party, is urging them to scale back their demands - including ambitious spending plans that have unnerved investors - to keep Italy’s debt pile, worth more than 130 percent of output, in check.

Barbara Lezzi, a 5-Star minister, on Thursday warned Tria against ditching the universal income proposal.

“If the universal income is not included in the budget then the whole government will be in trouble, not just Tria,” she said in a radio interview.

There has never been any suggestion that Tria wants to bin the 5-Star plan, but rather limit its initial scope. Newspapers said Tria had threatened to resign if 5-Star did not back off — reports that an economy ministry source said were baseless.

After Lezzi spoke, 5-Star leader Luigi Di Maio denied that there were divisions with Tria over the budget. “I deny any threat, any ultimatum,” he told reporters.

“We are working very well on a budget law that keeps the accounts in order,” he said. “There are no divisions, and on this there is the will of all the parties in the government to give Giovanni Tria a hand to reach these results.”

For its part, the League is seeking sweeping tax cuts, its main campaign pledge. Both parties also want to roll back a 2011 pension reform and head off a 12.4-billion-euro automatic VAT increase due next year.

Italy paid the most since 2014 to sell three-, seven-year and 30-year debt at auction on Thursday as tensions over the country’s next budget law kept investors on edge.

European Central Bank President Mario Draghi told reporters in Frankfurt that comments by some Italian policymakers on the 2019 budget had caused problems in the markets.

“Unfortunately we have seen that words have created some damage and (Italian) interest rates have gone up,” Draghi said.

“What we are now waiting for is facts”.

In Paris, European Economics Affairs Commissioner Pierre Moscovici said Italy needed to cut wasteful spending and prioritise investment and infrastructure development to help stimulate growth and productivity.

“It’s in Italy’s interest to reduce its very high public debt. It would be a lie to think one can invest more with a higher deficit,” he said at a European Commission event.

Reporting by Valentina Consiglio and Massimiliano Di Giorgio in Rome, additional reporting by Yann Le Guernigou in Paris; Writing by Giselda Vagnoni; Editing by John Stonestreet and Crispian Balmer

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