Italy says 2020 budget not a significant deviation from EU rules


Adds details, background.

ROME, Oct 24 (Reuters) - Italy's 2020 draft budget does not imply a significant deviation from European Union rules, the Italian government said in a letter sent to the European Commission on Thursday.

Italy's fiscal plan assumes a rise in the structural deficit, the measure excluding business cycle swings and one-off expenditure and revenue, of 0.1% of GDP. Under EU rules, it should fall 0.6% of GDP.

"The projected change in the structural balance in 2020 would not constitute a significant deviation", Economy Minister Roberto Gualtieri said in response to EU letter asking for clarification over its budget for next year.

The EU-friendly coalition government of the anti-establishment 5-Star Movement and the centre-left Democratic Party (PD) has set a headline deficit target of 2.2% for next year, unchanged from 2019.

EU Commission told Rome on Oct. 22 that a preliminary assessment of the draft showed it fell short of EU fiscal recommendations to reduce spending.

That was the same message conveyed to Italy last year, when Brussels threatened the previous government, a eurosceptic coalition of 5-Star and the far-right League party, with an infringement procedure.

However, the situation has changed since then. EU Commissioner Pierre Moscovici said on Tuesday that Brussels would not ask for changes to Italy's budget, reiterating the soothing message he delivered last week in an interview with Reuters.

Italy has proportionally the second-highest public debt in the European Union after bailed-out Greece, but it has made little progress in reducing its deficit towards a balanced budget in recent years as EU rules prescribe.

Rome said it wants to focus on reviving its stagnant economy, which in the third quarter of 2019 is likely to continue the flat trend of the past 18 months

"While mindful of the need to put Italy's debt-to-GDP ratio on a clear downward path, we believe that the key goal is to rekindle economic growth", Gualtieri said in the letter.

(Reporting by Giuseppe Fonte; editing by Jon Boyle, Larry King)

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