‘No chance of Italexit’: Italy is not leaving the EU or the euro, PM insists

Italy will not leave the European Union or abandon the euro, Prime Minister Giuseppe Conte said on Monday amid a standoff with Brussels over the populist government's big-spending budget.

'No chance of Italexit': Italy is not leaving the EU or the euro, PM insists
L to R: Italy's Deputy Prime Minister Luigi Di Maio, Prime minister Giuseppe Conte and Deputy Prime Minister Matteo Salvini. Photo: Filippo Monteforte/AFP

“Read my lips: for Italy there is no chance of Italexit, to get out of Europe or the eurozone,” Conte told journalists in Rome after the European Commission voiced serious concern over the government's proposed budget aimed at stimulating growth. 

The governing coalition told Brussels on Monday that it would stick to its high-spending draft budget, but will scrupulously avoid going over its own debt and deficit limits.

“The figure of 2.4 percent [deficit to GDP ratio in 2019] is a ceiling that we have solemnly undertaken to respect,” Conte told journalists after the coalition sent its pledge in a letter to EU officials in Brussels. 

The European Commission formally warned Italy last week that its plans for 2019 were a serious concern, sending a letter to Rome to warn that it did not rule out rejecting the entire budget. 

READ ALSO: Italy's budget battle with Brussels: What you need to know

Photo: Gerard Cerles/AFP

Aimed at fulfilling electoral promises, Italy's planned spending boost is what the government calls its “people's budget”. It includes a series of pension and tax changes that will cost €37 billion, of which €22 billion will be paid for by borrowing, expanding the deficit.

“I see that in a country with six million living in poverty, they are implementing plans to alleviate poverty,” EU Economics Commissioner Pierre Moscovici said on Monday. Rome “thinks that raising public spending will create growth [but] we're in a period of overheating and most economists think that this will not be the case,” Moscovici told France Inter radio.

Nevertheless “the European Commission doesn't want a crisis between Brussels and Rome,” Moscovici said. “Italy's place is in the heart of Europe and not outside.”

Despite the brickbats from all sides, analysts say Rome is in a relatively good bargaining position given the eurozone's ongoing difficulties with Brexit.

“Italy is headed for a showdown with Brussels and I am not sure they have much to lose,” Manulife equities head David Hussey told AFP.

“Given how damaging Brexit is to the EU project, a loss of Italy would be devastating and to be avoided at all costs — hence I think Italy's hand is quite strong.” 

READ ALSO: Here are the main things included in Italy's 'people's budget'

Photo: Filippo Monteforte/AFP