Stop attacking EU Commission on fiscal policy, Juncker tells Renzi

By Francesco Guarascio

BRUSSELS (Reuters) - Italy should stop attacking the European Commission over its fiscal policy, the EU executive's president said on Monday, as Rome and Brussels quarrel over an expansionary budget proposed by Italian Prime Minister Matteo Renzi.

Renzi has criticised the Commission on several occasions, saying it applies rules too strictly.

"Italy is constantly attacking the Commission, wrongly so, and this does not produce the results they want," Jean-Claude Juncker told a conference, adding that changes to fiscal rules had allowed Italy to spend 19 billion euros more this year.

"It should no longer be said that this Commission continues the austerity measures applied in the past," Juncker said.

"If one wants to say it, one can ... but, in fact, I don't care."

Renzi has proposed a budget for 2017 that would not cut Italy's structural deficit as European Union rules require and that includes a headline budget deficit figure that is higher than previously agreed with the EU.

Replying to Juncker in a public speech later on Monday, Renzi said: "We are not making trouble, we are not intimidated by anyone."

"We can talk about investments but on securing school buildings no one can block us: we will keep that money outside of the Stability Pact," he added.

Italy's 2017 budget earmarks more than 6 billion euros, or 0.4 percent of its gross domestic product, in additional spending on migrants and to cover reconstruction costs after major earthquakes that have rocked the country this year.

But Juncker said that migrants and earthquakes would have an additional cost equivalent only to 0.1 percent of GDP.

A Commission spokeswoman did not confirm this figure in a statement later on Monday and added that the assessment of Italy's draft budget continues.

Separately, commissioner in charge of economic affairs, Pierre Moscovici, told a news conference the Commission would state its position when it publishes opinions on the draft budget plans of Italy and other EU states on Nov. 16.

The EU executive will release its economic forecasts for member countries over the next two years on Wednesday.

"Then you will have more elements on where we are and what are the gaps to bridge," Moscovici said in reply to a question on Italy's budget.

Moscovici and Italian Finance Minister Pier Carlo Padoan will discuss the budget plans later on Monday, on the sidelines of a meeting of euro zone finance ministers in Brussels.

The executive Commission is in charge of applying EU fiscal rules in member states and can sanction countries that fail to respect them, although this has never happened.

Italy, the euro zone's second most indebted country, after Greece, will hold a referendum on constitutional reforms on Dec. 4, which will shape Renzi's political future.

If, as opinion polls suggest is likely, he loses the referendum, it may strengthen the eurosceptic 5-Star Movement, which is already the most popular party in Italy according to some polls.

(Additional reporting by Francesca Piscioneri in Rome; Editing by Catherine Evans)

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