August 6, 2018 / 9:58 AM / 11 days ago

Respecting fiscal rules not Italy's priority, says deputy PM

ROME (Reuters) - Respecting European Union’s fiscal rules is not the priority of Italy’s new government though it will try to abide by them if they do not hamper its reform agenda, deputy Prime Minister Luigi Di Maio said on Monday.

FILE PHOTO: Italian Deputy Prime Minister Luigi Di Maio speaks in Rome, June 7, 2018. REUTERS/Tony Gentile/File Photo

He said Rome would try to apply its planned reforms, which include tax cuts and higher spending on pensions and welfare, without breaching fiscal conditions set by the European Union to help Italy reduce its public debt, the highest in the bloc after bailed-out Greece.

However, “our priority is the citizens and their needs,” Di Maio told broadcaster RAI in an interview.

Asked whether he considered sticking to a 3 percent EU limit on the public deficit an unconditional duty, Di Maio said that respecting fiscal rules “cannot be a way to say that we cannot implement” the reform agenda.

The comments had no immediate impact on Italy’s bond yields, after a sell-off of the country’s debt last week that on Friday briefly pushed yields on its 10-year bonds IT10YT=RR above 3 percent for the first time since June.

Di Maio’s main government partner Matteo Salvini, leader of the right-wing League, made similar remarks on Sunday.

“We’ll do our best to avoid having to raise the deficit and try to respect all the little rules, but if the choice is between helping or ruining families, I say the 3 percent deficit-to-GDP ratio is not the Bible,” Salvini told daily Corriere della Sera.

The ruling coalition is made up of the League and the anti-establishment 5-Star Movement led by Di Maio.

The party chiefs’ remarks seem at odds with Economy Minister Giovanni Tria, an academic who is not from either party, who has repeatedly said he wants to prevent any rise in Italy’s structural deficit, adjusted for economic growth fluctuations.

Senior government officials reached a compromise on the next budget’s outline on Aug. 3. Tria said he was satisfied with the preliminary agreement, stressing it was compatible with budgetary objectives.

Another meeting on the budget is expected to take place on Wednesday, according to Italian newspapers.

The government needs to agree its fiscal plan for next year by September and must present a draft budget to the European Commission by mid-October.

Reporting by Francesco Guarascio; editing by John Stonestreet

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