Italy's finance minister Giovanni Tria has presented what he called "brave and responsible" budget plans that forecast growth of 1.5 percent in 2019, 1.6 percent in 2020 and 1.4 percent in 2021.
In his letter to the European Commission late on Thursday, Tria also confirmed a deficit target of 2.4 percent of GDP in 2019, 2.1 percent in 2020 and 1.8 percent in 2021.
The populist government also set a debt-to-GDP target of 130 percent for 2018, 130 percent in 2019, 128.1 percent in 2020 and 126 to 127 percent in 2021, according to its forecasts.
The growth forecasts sent Italy's main stock index 0.9 percent lower on Friday morning and pushed Italy's borrowing costs slightly higher too with the yield premium on the nation’s bonds over those of German bunds rising to 281 basis points.
The 2.4 percent deficit target for 2019 is triple that set by the previous centre-left government. And in the forecasts posted on the Italian treasury website Thursday, the treasury includes a rise in the structural-deficit target, or net of the effects of the economic cycle and of one-time measures, to 1.7 percent of output in each of the next three years.
The 1.7 structural deficit target is up from the 0.9 percent estimated for this year. The figure is considered key by the European Commission in its assessment of the member countries’ budget plans.
Tria, a non-affiliated technocrat had sought a 1.6 percent budget deficit but was overruled by the Five-Star Movement and the League party coalition partners.
Five Star and the League want to spend over 20 billion euros on their flagship policies of a basic citizen's wage, increases to the minimum state pension, reforms to lower the retirement age and the introduction of a flat income tax for at least one million self-employed people.
The government claims that due to its plans to invest billions of euros in the economy, Italy’s growth will outperform EU forecasts and debt will continue to fall despite its plans to increase the deficit.
European Commission must give its opinion on Italy's budget plans by end-November and the budget must be approved the Italian parliament this month.
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