Italy will likely seek to widen budget shortfall, says Conte

Bloomberg

Italian Prime Minister Giuseppe Conte said his government would likely seek a wider budget gap as he draws up an ambitious reform plan to lobby for European Union (EU) assistance to restart the economy.
The government will focus on infrastructure projects including high-speed railways and may approve a value-added tax cut to stem the coronavirus’s impact on the euro-zone’s third-biggest economy. Conte made his comments after eight days of closed-door talks with ministers and leaders from business, finance and labour at a Renaissance villa in Rome.
“We will probably need to intervene for a further widening of the budget gap because the resources are not enough to cope with the impact of a horrible year both economically and socially,” Conte told reporters. He said the government will present its reform plan in September.
Conte said his government is heading toward “a forced decision” in the next few days on whether to strip toll-road operator Autostrade per l’Italia SpA, which is controlled by the Benetton family’s Atlantia SpA, of licenses following a deadly 2018 bridge collapse.
“I don’t have an acceptable proposal on the table,” Conte said, adding he was ready to consider a new offer. “Atlantia has asked for a clear solution, and I think that we as a government have a duty to give a clear solution in the next days.”
The premier is drawing up a reform plan to lobby for Italy’s share of a proposed 750-billion euro ($838 billion) EU program to help member states recover from coronavirus lockdowns.
The virus recession is battering an Italian economy that was already shrinking at the end of last year. The Bank of Italy forecasts a contraction between 9.2% and 13.1% this year, and a more limited rebound in 2021. That is set to send debt well above 150% of GDP.
Conte’s proposed tax cut may already be fuelling differences in interpretation within his coalition government. Deputy Finance Minister Laura Castelli of the anti-establishment Five Star Movement told daily la Repubblica that relief measures for hard-hit sectors like tourism could be ready soon, while Finance Minister Roberto Gualtieri, of the center-left Democratic Party, is pursuing a more cautious line on tax reform, La Stampa reported.
Conte, whose country stands to benefit the most from the proposed grants and loans, insisted at a videoconference of EU leaders that an accord must “absolutely” be reached by the end of July, according to an official familiar with his comments. He also called on leaders to “support the efforts of the Commission to make some resources available already for this year.”
Conte will likely seek parliament’s approval for about 10 billion euros in extra spending soon, government officials said, in the latest step to revive one of Europe’s most vulnerable economies. The government has already approved two stimulus packages worth a total 75 billion euros.