New budget rules do not single out Italy: EU

05 Sep, 2004

New budget rules for the euro zone putting more focus on debt are not intended to penalise Italy, the most indebted big European country, the EU Commission's monetary chief said on Saturday.
"This is not against anyone. It is for everyone," Joaquin Almunia, European Monetary Affairs Commissioner, told reporters on the sidelines of a conference in Italy.
"The proposals are good for everyone. I hope to convince all the members of the European Union of that."
Almunia on Friday announced proposals to change some elements of the Stability and Growth Pact that underpins the euro currency, in order to make them more growth friendly.
Among the changes, the Commission wants to emphasise debt and debt sustainability, a move which could put the spotlight on Italy where public debt is equivalent to 106 percent of gross domestic product (GDP).
EU Competition Commissioner Mario Monti - an Italian economist - said he supported Almunia's proposals but wanted to ensure highly indebted countries were not punished for past mistakes.
"I hope that if a country has adopted a policy to reduce its debt/GDP ratio, it should be taken into account going forward," Monti told reporters at the same conference.
Italy is seeking to bring down its debt level to 104.1 percent in 2005.
Almunia denied suggestions the changes sought to loosen the pact to let Germany and France escape punishment for running up excessive budget deficits.
Among the proposed changes would be a redefinition of the circumstances in which countries that break the pact's deficit cap might escape disciplinary action.
"I don't think it's about rigidity or flexibility. It's about adapting some of the rules of the pact to the new circumstances, to our experiences of the last years, new member states and to the new economic situation of Europe," he said.
Almunia said negotiations over the proposed changes to the pact would probably take several months.

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