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Recession hit Italy faces a fresh budget crisis



Italy faces a fresh budget row just months after ending a near six-month saga surrounding spending, after media reports in the country suggested the coalition government could move to raise taxes.

The purported move, which would see value-added-tax increased to bring in more government revenue, would be hugely controversial given that the country slipped into a recession at the end of last year.

Output in Europe’s fourth-largest economy contracted by 0.2% in the fourth quarter, on the heels of a 0.1% drop in the quarter before that.

Any increase would be made even more divisive by the fact that both parties in the coalition — the Five Star Movement and the Northern League — campaigned on platforms of keep taxation levels flat for the majority of Italians at last year’s elections.

Read more: The European Union’s subversion of democracy contributed to the recession in Italy

Government officials, however, moved quickly to squash the rumors, with finance minister Giovanni Tria describing those responsible for reports of higher taxes as “follies and speculations,” in a radio interview, reported by Bloomberg.

“They’re all crazy, not only because we aren’t talking about it, but because it would be wrong to so this from the standpoint of economic policy,” Tria added, according to the ANSA newswire.

“Why should we make a budget move to put Italian businesses into greater difficulty?”

Speculation over an adjustment to Italy’s budget comes less than two months after the nation seemingly ended a months-long dispute with the European Union over its spending plans for the next 12 months.

The dispute centered on how large a deficit the Italian government proposed to run. A previous government had agreed with the EU to keep the deficit below 1.8% of Italy’s GDP. Italy’s new, populist government had proposed to increase the deficit to 2.4% of GDP.

On December 19, Brussels and Rome agreed a compromise budget after a long period of negotiations, to allow a deficit of 2.04%, some €6 billion ($6.7 billion) less than the first proposal.

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