EU's Moscovici says sanctions possible if no deal with Italy on budget

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European Commissioner for Economy and Finance Pierre Moscovici that the cost of servicing Italian public debt is already equal to the country's entire spending on education - €65 billion a year, before adding that the Commission and the Italian government are not now involved in negotiations on a compromise regarding a revised budget.

Italy has until November 13 to submit a revised budget, and President Sergio Mattarella has promised a "constructive dialogue" with Europe's institutions.

Centeno said he hoped "steps" would be taken to bring it back closer to European Union budget rules.

Officials are concerned that with a public debt to GDP ratio of 133 per cent, Italy would be courting disaster through higher borrowing, especially that the money is to go towards consumption rather than growth-boosting investment.

"If you share a currency with many other countries, we all have responsibilities to each other and those responsibilities are now articulated in the rules that the European Commission oversees", Mr Donohoe told reporters on entering.

This was said yesterday the Chairman of the Eurogroup Mario Centeno: "Italy has another week to re-present the budget".

German Finance Minister Olaf Scholz says a nation like Italy with debt worth 130 percent of GDP "has to proceed far more cautiously" and that euro-region members must follow similar budget strategies to foster financial stability. "Above all, the European Commission is extending a hand to Italy and I would like Italy to grasp that hand".

The situation is reminiscent of the Greek debt crisis, except with Italy's much bigger and more central eurozone economy at the heart of the storm, the size of the bailout would be so large as to make it virtually impossible. We're not in a negotiation.

Italy already owes 2.3 trillion euros ($2.6 trillion), a sum equivalent to 131 percent of its GDP, and even if Brussels fails to punish Rome, many assume the markets will.

Once Italy responds to the commission, the EU's executive arm will have three weeks to publish its final assessment - which may include triggering a procedure that could eventually lead to financial sanctions for the government in Rome.

Dutch Finance Minister Wopke Hoekstra backed the budget supervision process but he would not speculate about what Italy might do or what response might be needed if it refuses to submit a new plan.

The Goldman Sachs economist suggested market pressure will play a "key role" on whether the Italian Government carries out its plans despite having signalled no intention to give up the proposed budget.

Italy's deputy prime minister told the Financial Times in an interview published Sunday that he believes Rome's controversial spending plans will become "a recipe" for reviving European growth and that the continent is ready to abandon austerity and embrace the deficit-busting approach of U.S. president Donald Trump.

Italy's Finance Minister Giovanni Tria speaking to reporters in Rome.

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