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| European Commission Vice President Jyrki Katainen |
European Commission Vice President Jyrki Katainen urged Italy on Thursday to submit a draft budget in line with commitments and warned of risks for Italy and other eurozone states.
Italyโs eurosceptic government raised market concern when it announced two weeks ago a plan to raise its headline budget gap to 2.4 per cent of gross domestic product in 2019 and flout fiscal targets agreed with euro zone peers.
โThe situation is very fragile,โ Katainen told reporters when asked about Italyโs budgetary plans and initially negative market reaction. He said no one wanted financial instability that could hit Italy and other euro zone countries โthat may suffer from contagion risksโ.
On Wednesday, the governor of the Bank of Greece said a drop in Greek bank shares was caused by external factors, as analysts blamed Italyโs row with the EU over its budget as the main cause of market pressure on Greek lenders.
Katainen, who is responsible for jobs and growth, said the Commission was trying to convince Italy to change its budget plans, which are likely to flout EU fiscal rules.
โEverybody has seen the situation in the markets, which is not positive,โ he said, referring to reaction to the Italian plans. โOur interest is to get a result which is credible and try to convince the Italian government to take responsibility.โ
All euro zone states have to submit their draft budgets for next year to Brussels by Oct. 15. The Commission could reject Italyโs plan if it is found in breach of fiscal rules.
โWe do hope we can get good cooperation with the Italian government,โ Katainen said.
He added: โIt is not too late to maintain stability. It is not too late to make sure that growth can continue in Italy. It is not too late to show that public financing in Italy is on a credible path.โ
Last week, the Commission sent a letter to the Italian government warning its budget plans were a reason for โserious concernโ as they appeared to deviate significantly from agreed fiscal targets.
