Italy, five others at risk of breaking EU budget rules with 2017 draft budgets
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A picture illustration of Euro banknotes, April 25, 2014. REUTERS/Dado Ruvic/Illustration/File Photo
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BRUSSELS (Reuters) - Italy and five other countries are at risk of breaking European Union budget discipline rules with their 2017 draft budgets, the European Commission said in a statement on Wednesday.
The five other countries are Belgium, Cyprus, Lithuania, Slovenia and Finland.
"The Draft Budgetary Plans of these Member States might result in a significant deviation from the adjustment paths toward the respective medium-term objective," the Commission said.
The medium-term objective is a budget balanced in structural terms, which means excluding one-off spending and revenue and the effects of the business cycle.
Italy's structural deficit, which excludes one-off items and economic cycle swings in income and spending, has been rising every year since 2014 and is to jump to 2.2 percent in 2017 from 1.6 percent in 2016 and then further to 2.4 percent in 2018, according to Commission forecasts last week.
This goes clearly against EU rules which say that countries have to cut their structural deficit by at least 0.5 percent of GDP every year until they reach balance or surplus.
Italy says the higher structural deficit is due to extraordinary spending on migration and post-earthquake reconstruction. But the structural deficit indicator does not take into account such one-off items and the Commission called the explanation "not constructive".
On Wednesday, European Commissioner for Economic and Financial Affairs Pierre Moscovici sounded more accommodating.
"The significant part of the deviation is due to the cost of the seismic activity in the country, very serious this year and to migration inflows," Moscovici told a news conference.
"We will take that into account," he said.
Italy is also breaking EU debt rules -- it public debt has been rising for a decade and is to continue rising to reach a new high of 133.1 percent of GDP next year from 133.0 percent expected this year, according to Commission forecasts.
EU rules say Italy has to reduce its debt each year by one twentieth of the difference between its actual debt to GDP ratio and the EU's maximum allowed debt of 60 percent of GDP on average over 3 years.
That would imply Rome has to cut its debt by 3.65 percent of GDP, rather than increasing it by 0.1 percent next year.
The Commission said on Wednesday it would issue a separate report on the problem of Italian debt later.
(Reporting By Jan Strupczewski)
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