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Eurozone slaps warning to Italy on EU budget rules

French Economy Minister Bruno Le Maire warned his Italian counterpart Giovanni Tria that all eurozone nations need to abide by EU spending rules
French Economy Minister Bruno Le Maire warned his Italian counterpart Giovanni Tria that all eurozone nations need to abide by EU spending rules AFP

Luxembourg (AFP)

Eurozone finance ministers firmly warned Italy on Monday to abide by EU rules on public spending, just days after Rome announced a big spending boost in defiance of Brussels.

But, meeting in Luxembourg, the ministers also vowed to delay judgement on the plans laid out by Italy's populist government, which have already spooked markets and put the country's fragile economy under extra pressure.

"I just want to make very clear that there are rules and the rules are the same for every state because our futures are linked," French Finance Minister Bruno Le Maire told reporters ahead of regular monthly talks with his eurozone counterparts.

However, "rushing is not the best advice," he said, adding that ministers must move ahead "step by step" before coming down on Italy too strongly. France, he acknowledged, has also struggled to meet the bloc's budget rules.

The fragile state of Italy's economy has reawakened memories of the debt crisis amid dangers that Rome could face punitive measures by its EU partners if it insisted on breaking the bloc rules on running excessive deficits and high debt.

"Italy is on everybody's mind," said Mario Centeno, head of the Eurogroup and Portuguese finance minister. "I know that we all have questions about it and that we are expecting answers."

Italian Finance Minister Giovanni Tria was also in Luxembourg to defend Rome's budget plan amid rumours that he threatened to resign on objections towards defying EU rules so bluntly.

Tria urged his European partners to "stay calm".

"I will try to explain what is happening and our decisions," he said.

- 'Stay calm' -

The government has drafted a budget that raises spending, pushes the public deficit to around 2.4 percent of gross domestic product for the next three years, and probably hikes the public debt above its already excessive level of 131 percent of GDP.

The previous government was aiming for a deficit of 0.8 percent of GDP that would help cut debt but possibly hamper economic growth.

Tria is seen as a cautious presence in the far right-populist coalition government, where rejection of the EU is a dominant theme.

The commission will now be in charge of assessing the Italian budget, which will not be officially submitted to Brussels until October 15 and could be revised before then.

Italy's powerful deputy prime minister Matteo Salvini said Saturday "I do not care" if the European Commission rejects a budget plan.

"If Brussels says I cannot do it, I do not care, I will do it anyway," the outspoken leader vowed.

Negative comments by EU officials on Friday troubled financial markets and pushed up the cost of borrowing for the government.

"The Italian government must tell the truth to the Italians," said Economic Affairs Commissioner Pierre Moscovici, who will handle negotiations with Italy on the budget.

"More public expenditure that can make you popular for a while but then who pays in the end?" Moscovici asked as he entered the talks in Luxembourg.

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