MNI EXCLUSIVE: Italy '19 Fiscal Plan Delay Due Political Limbo

--Italy Parties Face Budget Hurdle In Parliament 

--EC Expects Initial 2019 Fiscal Document In April 

--Outgoing Treasury Will Approve Only 'State of Play' Data

By Silvia Marchetti

     ROME (MNI) - Final approval of Italy's 2019 fiscal plans could be delayed

due to the ongoing political impasse, MNI has learned.

     Treasury sources told MNI the outgoing Democrat government would only be

working on 'tendency' data to be released in April, and not on fiscal target

objectives "for upcoming years".

     "It's a very delicate moment. We can only give up-to-date fresh data on

growth, deficit and debt, a sort of state of play of where we stand; but not

define fiscal goals given that another government is expected to take over soon

and will most certainly have different targets and policy measures," said

re-elected Democrat deputy Mauro del Barba, a member of the Lower House budget

committee.

     The 2019 fiscal plan will be the pillar of the next budget, and its

approval is set to be a key testing ground for party talks and governing

coalitions.

     Del Barba argued that it's now up to both the 5 Star Movement and the Lega

party to forward their budget proposals so as to measure how much support they

can effectively gather from other groups.

     --PARLIAMENTARY LIMBO

     But timing is tight. Parliament won't be in full working mode until Easter

time, while the transition period to the formation of new government is expected

to take even longer.

     "It will inevitably be a neutral, partial fiscal plan, but there will be

guidelines to follow that cannot be totally ignored by whoever takes over," said

Del Barba, stressing that fiscal strategies cannot be  re-written overnight.

     Once approved by parliament, the 2019 fiscal plan must be forwarded to the

European Commission, who are closely monitoring what is happening in Rome.

     Economy minister Pier Carlo Padoan has tried to reassure Brussels that

Italy won't go off track, but 5 Star and Lega have been sending out mixed

messages on their budgetary agendas, with the latter even suggesting breaching

the 3% deficit-to-GDP rule if needed in order to support growth.

     Brussels is therefore likely to receive an incomplete fiscal plan in April,

but according to Del Barba, this should be of little concern compared to the

priority of exiting the current political stalemate.

     "It's not like the EC will be left hanging on this, our situation is very

complex and Brussels has more than once demonstrated understanding and leniency

when other countries have faced similar political phases," he argued.

     --BRUSSELS RULING

     Officials in Rome also hope Brussels may consider delaying its final

verdict over the incumbent government's 2018 budget -- a ruling expected in May

-- if the impasse is unbroken.

     Outgoing Democrat sources note that this has happened before for other

members states in political limbo, noting that the risk the EC asks for

additional budgetary measures would be coming at the wrong moment.

     Paolo Manasse, economics professor at Bologna's university, warned that a

prolonged delay in meeting fiscal deadlines could undermine Italy's credibility

on the European stage.

     "The truth is, we're in quite a risky situation given our high public debt.

Most politicians are brushing away concerns that Brussels might be over-reacting

to our domestic issues, but signals coming from 5 Star and Lega over how to next

define future budgets are certainly not encouraging," said Manasse.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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