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EU reckons Italy's budget unable to boost long-term growth: paper

MILAN (Reuters) - Italy’s budget does not contain measures able to boost growth and makes the country a “contagion risk” for the rest of the euro zone, la Repubblica newspaper said on Thursday, citing a European Commission document.

European Union and Italian flags are seen in downtown Rome, Italy, October 19, 2018. REUTERS/Alessandro Bianchi

The newspaper said the Commission’s Country Report, due to be approved next Wednesday, would forecast that the 2019 budget would have negative effects on economic growth, the budget deficit and the national debt.

“There are no measures capable of positively impacting on long-term growth,” the document said, according to la Repubblica.

The European Union’s economic commissioner, Pierre Moscovici, did not comment directly on the report on Thursday, but said the Commission would meet Italian officials in May.

“Rules are there to be respected and our Italian friends must respect the rules,” he told a conference in Paris organized by Politico.

“We will have to discuss in May with the Italian authorities where we are and the implementation of our agreement in December.”

Italy fell into recession at the end of 2018 and the Commission has predicted growth this year of just 0.2 percent, down from a 1.2 percent forecast it made last November.

This unexpected slowdown could make it hard for the government to meet its deficit target of 2.04 percent of gross domestic product this year, a hard-won compromise agreed with the Commission in December.

Deputy Prime Minister Matteo Salvini told Radio RAI it was too early to say if the government would have to introduce a corrective budget later this year since “the government budget’s measures need time to have (positive) effects on the economy”.

Economy Minister Giovanni Tria said on Wednesday some 2 billion euros put aside in the 2019 budget for reserve spending should be enough to cover any shortfall.

Reporting by Stephen Jewkes; additional reporting by Leigh Thomas in Paris; Editing by Robin Pomeroy and Crispian Balmer