REPEAT: MNI: Italy Govt Aims For Revised EMU Fiscal Treaties

Repeats Story Initially Transmitted at 10:39 GMT Jun 12/06:39 EST Jun 12

--Must Overcome ESM, Excessive Imbalance Procedures -- Sources

--Review EU's Corrective Arm, Budget Parameters

--Reconsider Trade Deals, Common Policies -- Sources

By Silvia Marchetti

     ROME (MNI) - Italy's new government has ambitious plans to renegotiate all

fiscal and monetary treaties in the Eurozone and to overcome binding budget

parameters that trigger infraction procedures, coalition sources have told MNI.

     Despite stressing that Italy's euro exit was not among the objectives of

the Lega-5 Star coalition, officials of both parties argued that the current

monetary union framework needs a major overhaul.

     "Our goal is to give all existing fiscal and budgetary treaties a major

restyle through a new round of negotiations on which we will start working soon

to rally support among other peer countries," said one source close to the

government.

     Both the Maastricht Treaty and the Growth and Stability Pact are in need of

a revision. It is paramount, according to the new cabinet, to revise all pillars

of economic and monetary union, deemed as "asymmetric" and tilting in favour of

market forces rather than the economic and social dimension of each of the

bloc's member states.

     "We need to return to the founding principles of cooperation, solidarity

and brotherhood on which the European union was built and which we have lost

along the way to the detriment of national sovereignty and dignity," explained

another government official.

     --COALITION TARGETS

     Among the targets outlined in the "Contract for Change" signed by Lega and

5SM, are a thorough review of monetary policy, the fiscal compact rule on debt

reduction, alongside the European stability mechanism (ESM) and the Bolkenstein

directive on services within the common market, all of which the new government

believes has jeopardized the national interests of each member state.

     But the most ambitious, and ambiguous, goal is to change the "punitive"

budgetary parameters that keep a country's public finances under the control of

Brussels, mainly the European infractions procedure mechanism put in place

against macroeconomic imbalances.

     In Italy's case, the risk is this is always triggered by the excessive

public debt level.

     It is not yet clear how the two parties aim to revise the working of the

EU's corrective arm and subsequent potential sanctions scheme that kicks in when

a state breaches fiscal rules.

     The sources didn't specify if the 3% deficit-to-GDP threshold, alongside

the debt-to-GDP parameter would be put under discussion, but did argue that if

such "rules end up harming a country rather than benefitting it, they should be

re-discussed at EU level".

     One high-level coalition official noted that the investment clause on

greater flexibility granted by the European Commission needed to be made

"permanent" and not a one-off measure.

     "Strategic investments made by a country should not be calculated within

the deficit threshold. Deficit level should be net of public investments. Such

approach has long been debated but never quite adopted by Brussels," the

official said.

     --TRADE DEALS IN FOCUS

     Existing trade deals between Europe and other world powers also needed to

be reviewed to further bolster and protect citizens' rights, alongside favouring

sustainable competition between peers within the single market.

     Other main deals to keep under watch are the EU-Canada Comprehensive

Economic Trade Agreement (CETA), the EU-USA Transatlantic Trade and Investment

Partnership (TTIP) and the Market Economy Status (MES) to China, sources said.

     "We want to make this clear: Italy will work cooperatively with all peer

countries to re-define the whole European architecture in order to make it more

resilient, but at the same time, to review existing common policies which have

turned out counter-productive across decades," said one source.

     "It is necessary to draw a clear line between national and European

competences, and, following the principle of subsidiarity, evaluate whether it

could be better to return certain competences to member states by making them

once again exclusive," the source added.

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