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EU may send Italy warning on draft budget

Staff Writer |
The European Commission is considering sending Italy a warning about its draft budget for next year, European Union officials said, because Rome's planned budget gap is much higher than previously promised.

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Last week, Italian Prime Minister Matteo Renzi announced an expansionary budget for 2017 before a constitutional referendum in December that may decide his political future.

In the draft budget, instead of a deficit of 1.8 percent of GDP next year that Italy itself pledged in a letter to the Commission in May, Renzi now expects a shortfall of 2.3 percent, against 2.4 percent in 2016.

"That is a big difference. Everybody was really surprised that Renzi decided to be so bold," one EU official involved in the process said.

EU rules also require governments to reduce their structural deficit, which strips off the effects of the business cycle and one-offs, by 0.5 percent of GDP a year until the books are in balance or in surplus.

But rather than reduce its structural deficit, Italy plans to increase it to 1.6 percent of GDP from 1.2 percent in 2016.

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