MNI SOURCES: Early Italy Elections Means No Budget Plan Likely

--New Election In Either Autumn or Spring Won't Change Budgetary Void

By Silvia Marchetti

     ROME (MNI) - If Italy's political crisis deepens, triggering an early

election, the country will have no definitive budget or fiscal targets for 2020,

no matter when a national vote is held, MNI understands.

     The only alternative to the current government would be fresh elections,

sources close to the League party told MNI without specifying when they could be

held. The source also attempted to downplay the impact of a delayed or void

budget plan, which should be forwarded to Brussels by mid-October for an initial

green light.

     "It's not a problem. Europe can't dictate the timetable, it has to wait for

us. Bear in mind the final approval date for the budget law by Italy's

Parliament is end of December, Brussels just wants to see a draft first and

given what is going on politically here, it will be lenient and wait for us,"

said another League party source, who noted how also Spain was going through

tough times.

     --NO FORMAL PLAN

     A bare outline budget could be sent to Brussels by October, with just a

base scenario outlook and no fresh measures or targets. However, whether the

coalition holds till December or collapses before, Italy would have no formal

budget plan to ease tensions in both the financial markets European Commission.

     The League secured roughly 40% of votes at the recent European elections,

which would enable it to form a new government alone if replicated in a general

election.

     According to Giampaolo Galli, deputy director at Italy's Public Debt

Observatory, if no budget is approved by parliament by December 31, a special

clause kicks-in limiting government spending to just essentials.

     Italy's government has pledged to avoid an automatic VAT hike that will

kick in next year if E23 billion in alternative resources aren't found by

December, added Galli.

     --NOT UNANIMOUS VIEW

     League's leader and Deputy Prime Minister Matteo Salvini may prefer a vote

in spring 2020, hoping to blame coalition partners 5 Stars for a lack of budget

plan and the resultant VAT hike, MNI understands.

     Sources say 5 Stars are "less in favour" of an early vote, still confident

a compromise could be found with the League to continue governing. The recent

European Parliament vote dealt a heavy blow to 5SM, which is now weaker into an

early vote.

     Despite earlier calls for a shake-up of the government, the League will no

longer be satisfied with a simple cabinet reshuffle, but instead wants "a new

strategy" on economic policy, fiscal reform, investments and European relations.

     "We have different views (to 5SM) regarding European fiscal targets,

treaties and policies", said the first League source.

     Neither League of 5SM want a technocrat government of transition, but one

could be required by head of state Sergio Mattarella in the coalition collapses

to put a budget plan in place by December and steer Italy through an election

campaign and a spring vote, said Roberto D'Alimonte, political science professor

at Rome's LUISS university.

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

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