ROME, June 1 (Xinhua) -- Italy was outlining a plan for cutting public spending and increasing revenues, the country's Economy and Finance Minister Giovanni Tria told the European Union (EU) Commission in response to a request of information over excessive debt.
"In preparation for the Draft Budgetary Plan 2020, and in light of updated macroeconomic projections, the Government is working on a comprehensive plan of spending review and revenue enhancement," Tria wrote in a letter published by the ministry on Friday night.
The letter was accompanied by the Treasury's technical documentation on debt development.
In the three-page document, the Italian finance minister explained the rise in debt-to-GDP ratio recorded last year was partly due to "a year-end increase in treasury balances in anticipation of sizable bond redemptions in early 2019."
"Other stock-flow adjustments also contributed to raising the debt ratio, notably the fact that we issued a higher share of government securities below par," Tria specified.
Adding to this picture some challenging macroeconomic conditions -- such as the drop in global trade and manufacturing activity seen in the second half of 2018 -- the official said implementing restrictive fiscal measures would have been "counter-productive" for Italy.
"I would strongly underline that the up-to-date information summarized in the attached Report on Debt Developments indicates that this year's deficit will come in below the latest official forecast," Tria went on in one passage.
He explained that "the year-to-date performance of the economy and of tax revenues has so far exceeded the projections of the Stability Program", and other recurrent revenues looked set to outperform as well, while the resources necessary to implement the government's new welfare policies would be less than those estimated in the 2019 Budget.
"As a result, the deficit would be significant lower than the Commission's forecast and the change in the structural balance would be compliant with the Stability and Growth Pact (SGP) also on the basis of the Commission's output gap estimate," the finance minister said.
On Wednesday, the EU Commission sent a formal letter to the Italian government, asking explanations for a lack of progress in cutting the country's public debt.
Italy's debt is in fact the second largest in the EU after that of Greece, accounting for 132.2 percent of GDP in 2018 from 131.4 percent in 2017, according to data by the Economy Ministry.
The Commission's text was partly published by all major media outlets here. "Italy is confirmed not to have made sufficient progress towards the debt reduction criterion in 2018," the EU executive body wrote.
While such concerns were conveyed from Brussels, the government this week discussed whether to defy EU fiscal rules -- eventually boosting budget beyond the EU threshold of 3 percent of GDP -- to implement new expansionary reforms, and especially a flat tax program, to revive economy.
The latest official statistics showed the Italian GDP expanded by 0.1 percent in the first three months of 2019, exiting a technical recession marking the last two quarters of 2018, but growing less than expected.
The latest exchange between Brussels and Rome came after the two sides' months-long standoff over the 2019 budget, which ended only in late December after the Italian rightwing government agreed to change its budgetary plan and reduce its deficit target.
Now, after the new letter from Brussels, the country might risk facing an excessive debt procedure (entailing fines) by the EU in the next months, if found in a prolonged non-compliance with the bloc's fiscal rules.
