Almunia rejects Italian budget plea

EUOBSERVER - EU monetary affairs commissioner Joaquin Almunia has castaside an eleventh hour plea to salvage Italy's budget deficit case, with the country now facing disciplinary action under the EU's stability and growth pact.

The commission accepted a report on Italy at their Tuesday meeting, which stated that Rome breached the 3 percent budget ceiling in 2003 and 2004, hitting 3.1 percent in both years, while heading for a 3.6 percent deficit in 2005 and 4.6 percent next year.

Joaquin Almunia noted that the deficit is "neither temporary nor exceptional", and said that the commission's economic and finance committee is "likely" to recommend punitive action to European finance ministers at the end of June. "This is the right way ahead", Mr Almunia said.

He added that the letter sent by Mr Siniscalco, which argued that Italy did face special circumstances, holds no water. "According to my first impressions, it will not change our assessment", the commissioner indicated.

The letter said that Italy was the victim of poor statistics regarding fourth quarter 2004 financial results and that the commission's report did not take into account its sizeable contribution to the EU kitty, as well as to international peace keeping operations.

Mr Almunia added that he is also "very worried" about the spiralling deficits in Greece and Portugal, as well as expressing concern for overspending in Germany and France.

Mr Almunia pointed out that five out of the ten new member states are currently facing excessive debts.

Ecofin likely to take tough line The commissioner indicated that European finance ministers are predisposed to "implement the stability and growth pact with extreme vigour" in the wake of recent budget rule reforms and amid worries over "the loss of credibility of our fiscal framework". "I am sure that will be the spirit in which the council will look at this", he said.

Mr Almunia also pointed out that there is no correlation between high public spending and economic growth, while urging fiscal consolidation throughout the EU. "Looking at EU members with high growth rates, they somehow have a balance or even a surplus in their national accounts", he said.