Italy's Tria Says Government Must Consider EU, Market Fears

(Bloomberg) -- Italian Finance Minister Giovanni Tria said the populist government must take into account “the fears of our European partners” and the concerns of investors in a dispute with the European Union over the country’s budget.

Speaking to the Senate in Rome, Tria said the 2019 budget is “moderately expansive” and that “intense dialogue” with the European Commission should find a solution that fully respects the administration’s economic policies.

Italy's Tria Says Government Must Consider EU, Market Fears

“We need to take into account the fears of our European partners, the degree of uncertainty in the markets and in particular in the financial markets,” Tria said. “Above all we must take into account of the uncertain economic context in which we are moving and the high level of the spread which weighs on this context.”

Tria has been lobbying behind the scenes as a moderating influence on euro-skeptic deputy premiers Matteo Salvini and Luigi Di Maio, who signaled earlier this week a readiness to compromise on a 2.4 percent budget deficit for next year, a spending spree which has been rejected by the EU’s executive arm. The two leaders have since however pledged to push through their costly reforms, which may prompt the commission to fine Italy.

More Talks

Salvini and Di Maio will meet Premier Giuseppe Conte, as well as Tria for more budget talks on Tuesday afternoon in Rome.

The government has yet to detail if and how it would be willing to ensure a lower deficit target, and has so far ruled out delaying implementation of landmark election promises -- the citizen’s income for the poor pledged by Di Maio’s anti-establishment Five Star Movement, and a lower retirement age promised by Salvini’s anti-migration League.

As the deadlock with Brussels persists, Tria sought to reassure. He mentioned “the need not to diverge from European rules” which would have “negative effects on growth and on the expansive policy, raising the cost of financing debt.” EU and investor concerns have focused on Italy’s debt pile, the biggest in the euro area.

No Affront

“We need to clarify to our partners in Europe that the aim of the budget is to tackle concrete problems, and certainly not to organize an affront to Europe or organize an exit from the euro,” Tria said.

Confirming the government’s openness to compromise remains limited, Di Maio said earlier Wednesday on a visit to L’Aquila in central Italy that the government cannot go back on its word. “We can’t betray the promises we made because we’re not like all the other governments. Promises will be kept, there won’t be delays,” Di Maio said.

In an interview with newspaper Corriere della Sera, Conte said the budget negotiations with the EU “won’t be easy.” Conte said he told EU economics chief Pierre Moscovici that “social stability counts more than that of finances,” according to the newspaper. “You just have to look at the protests of the ‘yellow vests’ in France.”

The grassroots French movement blocked roads across the country to protest gasoline taxes, which led to violent confrontations with police.

In a separate interview, European Commission Vice President Valdis Dombrovskis told La Stampa that he is seeking a “significant correction” to Italy’s proposed 2019 budget plan.

©2018 Bloomberg L.P.