EU reaches deal over Italy budget, puts disciplinary steps on hold

The European Commission on Wednesday reached a deal with Italy over its 2019 budget, avoiding disciplinary steps against Rome, ending months of verbal sparring and buoying Italian bonds and shares.

The Commission in October rejected the budget which included a deficit of 2.4 percent of gross domestic product, up from 1.8 percent this year, saying it would not cut Italy’s large debt and was an “unprecedented” breach of EU fiscal rules.

Under the compromise announced by Commission Vice President Valdis Dombrovskis in Brussels, Italy cut its deficit for next year to 2.04 percent of GDP. It also lowered its economic growth forecast for 2019 to 1.0 percent from 1.5 percent.