Commission reaches budget deal with Italy

A clash between Brussels and Rome looks to have been averted — for now.

Italy escaped the European Commission’s wrath Wednesday after giving ground in its controversial spending plans for 2019 that include a flat tax and a basic income for the poor.

Rome’s initiatives would have pushed its budget deficit next year to 2.4 percent of economic output, well above the previous Italian government’s promises of keep the figure closer to 0.8 percent of gross domestic product.

Italy’s new coalition government of the far-right League and the anti-establishment 5Stars Movement had dismissed any notion of respecting the previous government’s commitments and insisted it would fulfill its campaign promises from earlier this year.

That defiance put Rome on a collision course with Brussels, which was prepared to penalize Italy for spurning the bloc’s budget rules.

But a clash looks to be averted — for now — after Rome agreed to lower its deficit to 2.04 percent.

“Intensive negotiations have resulted in a solution for 2019 [that] allows us to avoid an excessive deficit procedure at this given stage,” Commission Vice President Valdis Dombrovskis said on Wednesday at a press conference in Brussels.

The Commission had been considering whether to open an “excessive deficit procedure” (EDP) today against Italy, given its “serious non-compliance” with the bloc’s budget and debt rules. The country’s public debt is about 131 percent of GDP.

EU governments would then likely have signed off on the EDP, which would have required “effective action” from Rome to bring its public finances back in line with EU rules.

Failing that, Italy could ultimately have faced a fine of up to 0.5 percent of GDP — roughly €9 billion.