BRUSSELS: The European Commission is considering whether to send Italy a warning about its draft budget for next year, a European Union official said on Wednesday, signalling that Rome's fiscal gap may exceed limits set by the EU.
Last week, Italian Prime Minister Matteo Renzi announced an expansionary budget plan for next year, meant to reinvigorate the country's sluggish economy before a constitutional referendum in December that may decide his political future .
The Commission, the EU's executive arm, is now evaluating that draft, as it does each year for all member countries to determine whether their budgets comply with the EU Stability and Growth Pact.
It may send warning letters within a week of getting a draft if it risks breaching EU rules. "We are still assessing the Italian budget," an EU official told Reuters, and the Commission is considering whether to send a letter to Italy but has not made a decision yet. "We are assessing whether we can agree with the Italian macro-economic assumptions." In its draft budget, the Italian government forecast that the economy will grow by 1 percent next year - more than most economists expect.
The Commission will issue its new economic forecasts on all EU countries in the first half of November. The Commission is also assessing whether Italy can raise the revenues it plans and what leeway can be granted for spending on immigrants and on reconstruction after an earthquake in central Italy in August.
Brussels has the power to reject a state's draft budget within two weeks of its submission but so far has never used that power. In 2014, the Commission sent a warning letter to Italy but ultimately did not reject its draft budget.
A spokeswoman said the Commission would not comment on country's draft budgets at this stage. "Any exchanges, whatever form they may take, or indeed opinions of the Commission are meant to inform national decision-making processes over the budgets before they enter into force," she said.
The Commission's assessment comes as the Italian government campaigns for a constitutional referendum on Dec. 4 that may determine whether Renzi stays in office. EU diplomats believe the Commission will do what it can to avoid damaging Renzi. Commission President Jean-Claude Juncker has been making clear to officials he shares that view, telling one internal meeting: "If we give up on Renzi, we give up on Europe".
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