Italy, leading a drive for greater flexibility in the way the rules
are applied to encourage economic growth and investment, has the
second-highest public debt in the euro zone as a proportion of
national output, after Greece.
Italian Prime Minister Mateo Renzi, pressing his campaign for
greater fiscal flexibility, said all the money governments invested
in broadband networks should be stripped out of the calculation of
"Every euro spent in digital infrastructures must be out of the
box," Renzi said in English at a conference in Venice.
Italy opened the first finance ministers' meeting of its European
Union presidency by calling for 'incentives' to reform after years
of rigid focus on budget austerity. But Rome faced immediate
resistance, including from Germany.
"Italy is delivering reforms and, as chairman, my goal is to help
every country to find incentives to do reforms," Italian Economy
Minister Pier Carlo Padoan told reporters.
Padoan chairs meetings of the 28 EU finance ministers, a key forum
for any change in the direction of economic policy.
But even before the session began, Jeroen Dijsselbloem, head of the
18-nation Eurogroup of ministers from the single currency area,
painted Italy's reform effort in an unflattering light and insisted
Rome would get no special leeway.
"Competitiveness has to improve and economic growth has to pick up
and lots of work needs to be done there," he said. "Italy has been
showing almost zero growth of productivity for many years and that
has to improve."
Asked whether any flexibility would be given to Rome to meet its
budget targets, Dijsselbloem said: "We don't do flexibility per
country, we do flexibility for all of the countries."
In part of the meeting that was broadcast, German Finance Minister
Wolfgang Schaeuble cautioned peers against slacking on budgets,
saying that structural reforms were no alternative to reining in
excess spending or "fiscal consolidation".
Austrian State Secretary Jochen Danninger voiced similar scepticism.
"The existing rules are to be respected to the letter," he told
journalists ahead of the meeting.
"Within the framework of these rules, there is enough flexibility,
so no weakening of the rules."
Italian ministers have hinted at the possibility that public
investments on schools and road and rail infrastructure should also
not be counted towards its budget deficit.
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They have also worried about rules that will require Rome to reduce
its overall debt level as the economy, just out of recession, is
struggling to grow.
Italy's debt is projected to reach 135 percent of output at the end
of the year. Under EU rules, governments have to strive to balance
their books and cut public debt to 60 percent of gross domestic
product within 20 years.
But the regime also says that governments can be given more time if
they undertake reforms that help economic growth - an option that
has so far never been used.
The ministerial debate began as Jean-Claude Juncker, the designated
president of the European Commission, was to begin meeting political
groups in the European Parliament to outline his policy program.
The former Luxembourg prime minister and Eurogroup chairman, who has
put measures to encourage economic growth at the center of his
agenda, is likely to be sympathetic to arguments that more leeway
needs to be shown.
Supported by the main pro-European center-right, center-left and
liberal groups, Juncker is expected to win approval from the EU
legislature in a vote on July 16.
EU leaders nominated him last month despite opposition from Britain,
which depicted him as an old guard federalist and Brussels insider,
unsuited to the task of shaking up the executive body which proposes
and enforces EU laws.
(Additional reporting by Jan Strupczewski and Martin Santa; Editing
by Paul Taylor)
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