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| Italy budget deal struck with Europe after months-long row | Italy budget deal struck with Europe after months-long row |
| (about 1 hour later) | |
| After months embroiled in a high-profile diplomatic row, Italy has agreed a deal on its budget with the European Commission. | After months embroiled in a high-profile diplomatic row, Italy has agreed a deal on its budget with the European Commission. |
| The Commission had demanded changes to Italy's budget plans because of the country's high debt. | |
| Italy initially stood its ground, leading EU officials to threaten disciplinary action and potentially expensive fines. | Italy initially stood its ground, leading EU officials to threaten disciplinary action and potentially expensive fines. |
| But European officials said Wednesday's agreement avoided such action. | But European officials said Wednesday's agreement avoided such action. |
| Under the deal, Italy has agreed to lower its planned budget deficit from 2.4% to 2.04% - not as much of a reduction as European officials had hoped for. | |
| The value of Italy's concessions in understood to be a little more than €10bn (£9bn). | |
| Economic commissioner Pierre Moscovici, however, acknowledged it had been a difficult year for the Italian people, citing the collapse of the Genoa bridge in August and the widespread damage caused by recurrent storms. | Economic commissioner Pierre Moscovici, however, acknowledged it had been a difficult year for the Italian people, citing the collapse of the Genoa bridge in August and the widespread damage caused by recurrent storms. |
| "The agreement reached today shows unambiguously that the European Commission is not the enemy of the Italian people," he said. | "The agreement reached today shows unambiguously that the European Commission is not the enemy of the Italian people," he said. |
| "We are not a machine made up of insensitive bureaucrats, imposing austerity and denying democracy. I hope that today we can move beyond such caricatures. | "We are not a machine made up of insensitive bureaucrats, imposing austerity and denying democracy. I hope that today we can move beyond such caricatures. |
| "I hope that today we can also put to rest any doubts over Italy's place in Europe." | "I hope that today we can also put to rest any doubts over Italy's place in Europe." |
| Valdis Dombrovskis, the commission vice-president in charge of financial stability, said the agreed budget "still raises concern". | Valdis Dombrovskis, the commission vice-president in charge of financial stability, said the agreed budget "still raises concern". |
| But he said the deal meant disciplinary action could be avoided - "provided that the agreed measures are fully implemented". | But he said the deal meant disciplinary action could be avoided - "provided that the agreed measures are fully implemented". |
| While Italy's spending is below the 3% deficit rule -which many countries, like France, exceed - its debt pile is the second-highest in Europe, and the main concern for European officials was that the debt not increase. | |
| Under the deal, the budget has been balanced with a reduced growth forecast, which has been revised downwards from 1.5% to 1% for this year and next. European officials had felt the Italian government's expectation of 1.5% growth was overly optimistic. | |
| But officials are still concerned about the long-term cost of the Italian government's two flagship policies - a universal income for poor Italians and the reversal of pension reforms which would lower the retirement age. Those plans have been postponed by a few months as part of the changes to achieve the new budget goals. | |
| Markets responded positively to the news of the deal, with Italian bonds and stocks performing better on Wednesday. | |
| The deal still needs to be approved by the Italian parliament. The European Commission said it would watch closely to ensure the agreement was adhered to - and potentially resume its procedures if it is not. |