Tria Says Budget Adjustment Would Worsen Italy's Economic Slump

(Bloomberg) -- Italian Finance Minister Giovanni Tria said a budget adjustment isn’t needed this year, arguing that additional tax hikes or spending cuts would only worsen the nation’s economic outlook.

“They are all follies and speculations,” Tria said during an interview with Mediaset Spa’s Rete4 TV channel, commenting on press reports that a value-added tax increase may be needed to bring in more revenue.

The government is committed to keeping the deficit under control and avoiding measures that could damage the euro region’s third-biggest economy that’s “currently between stagnation and recession,” he said.

Italy’s output contracted for a second quarter in the final three months of last year, slipping into what economists call a technical recession. The government reached in December an agreement with the European Union on a revised deficit target this year at 2 percent of gross domestic product as part of its 2019 budget.

Tria said a higher budget ratio due to lower-than-forecast economic growth would not require additional measures. Italy needs to complete public works projects, such as the Italy-France TAV high-speed rail link approved by the previous government.

Separately, Tria commented on the political debate over the legal nature of the Bank of Italy’s gold reserves, saying they are held and managed by the central bank within the European monetary union’s framework. He added that they couldn’t be ceded to the government because that would break state-aid rules.

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