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Italy expects no further EU demands to correct budget

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[November 22, 2014]  FLORENCE Italy (Reuters) - Italy does not expect any more requests from the European Commission to change its 2015 budget to meet European rules on debt reduction, Italy's top official on EU policy said on Saturday.

Prime Minister Matteo Renzi's government has already tightened its initial budget at the Commission's request, but last week an EU source told Reuters the commission may push Italy to trim it again.

"We expect the budget to be assessed without any requests for adjustment," Sandro Gozi said on the sidelines of a conference in Florence, Italy.

The original budget was an expansionary, tax-cutting package which Renzi said was needed to resuscitate a recession-bound economy which has shrunk by about 9 percent since 2007.

The dispute with the EU centers on Italy's "structural" deficit, adjusted for the business cycle. Rome agreed to trim this by 0.3 percentage points, or 4.5 billion euros ($55.75 billion), in an attempted compromise between the 0.1 percent cut it originally suggested, and the 0.7 percent Brussels wanted.

Italian Economy Minister Pier Carlo Padoan wrote to European Commissioner for Economic Affairs Pierre Moscovici and Commission Vice President Valdis Dombrovskis on Friday to offer more details on the treasury's plans and defend the budget.

"Any additional correction would further clip the wing of a fragile recovery," Padoan wrote in a letter published on the website of Italian newspaper Corriere della Sera.

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The minister said further changes would worsen Italy's "debt dynamics". Italy has the second-highest public debt in the euro zone after Greece as a proportion of output.

Padoan underlined in the letter that Italy had agreed to cut its overall deficit to 2.6 percent of output from 2.9 percent, below the EU's 3 percent limit which he has pledged to respect.

The Commission is due to announce its assessment of Italy's budget plans by the end of November. (1 US dollar = 0.8072 euro)

(Reporting by Silvia Ognibene, Writing by Isla Binnie; Editing by Alison Williams)

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