May 24, 2018 / 5:50 AM / a year ago

Italy should further cut budget deficit this year, EU Commission VP tells paper

MILAN (Reuters) - Italy should further cut its structural budget deficit this year and press ahead with prudent budget policies, the Vice President of the European Commission told a daily on Thursday.

Valdis Dombrovskis said Italy should further cut its structural deficit to GDP ratio by 0.3 percent this year, net of one-off and cyclical effects, speaking in an interview with Corriere della Sera.

Asked whether this meant that the government needed to approve further budget measures this year, Dombrovskis said he could not say that now and that the Commission would talk to the newly-formed government.

“The government is being formed. For now, all I can say is that it is important (for Italy) to keep the path of responsible macroeconomic and budgetary responsibility,” Dombrovskis added.

On Wednesday, Italy’s president gave little known law professor Giuseppe Conte a mandate to lead the first government made up of anti-establishment parties that have vowed to shake up the European Union.

The two groups - the 5-Star-Movement and the League - last week agreed to a government pact, promising to slash taxes, ramp up welfare spending, posing the biggest challenge to the bloc since Britain voted to leave it two years ago.

The European Commission warned on Wednesday that Italy’s financial stability was at risk from possible interest rate increases and political worries. The EU executive warned the incoming government it should continue trimming Italy’s heavy public debt.

Reporting by Giulia Segreti; Editing by Clarence Fernandez

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