The ANNOTICO Report

EU launched  disciplinary action vs Italy for an excessive deficit.

Italy not enthralled with the treatment or dialogue, and responds with
recriminations of  Reintroducing the Lira, &  threats of Vetoing EU Budget

www.chinaview.cn
2005-06-08

    BRUSSELS, June 7 (Xinhuanet) -- The European Commission, the executive
arm of the European Union (EU), on Tuesday launched disciplinary action
against Italy for an excessive deficit.It is the first such move since EU
budget rules, named Stability and Growth Pact, were overhauled earlier this
year.

    According to a statement issued by the Commission, Italy's public
deficit has exceeded the ceiling of 3.0 percent of gross domestic product
(GDP) in both 2003 and 2004.The Commission said the excessive deficit could
not be blamed on exceptional circumstances.

    "The excess of the deficit over the reference value is not exceptional,
as defined by the Pact... nor is it the result of a severe economic
downturn," it said in the statement.

    The Commission said the deficit "has been above the reference value for
two years and, according to the commission's spring forecast, it will be
well above 3.0 percent in 2005 and 2006, evenif economic growth returned to
its potential rate."

    The EU finance ministers agreed revisions to its budget pact inMarch,
nearly 18 months after its rules were effectively suspended despite
repeated violations of the 3.0 percent rule by France and Germany.

    The Commission's action and recommendations will be examined byEU
finance ministers at their next meeting on July 11 and 12.

http://news.xinhuanet.com/english/
2005-06/08/content_3056928.htm

Agence France Presse
07 June 2005

LUXEMBOURG : Eurozone finance ministers swatted aside suggestions Monday
from Italian ministers that Italy could adopt another currency as
irresponsible and insisted the euro's credibility was safe.

"You will have heard that in Italy there were certain fairly absurd
statements according to which the question may arrive of the country
leaving the euro and I said right away that we weren't going to discuss
such nonsense," said Luxembourg Prime Minister Jean-Claude Juncker after he
hosted a meeting of eurozone finance ministers.

He said this was "not because we would be totally unable to do so but
because the fact is that this is really quite absurd".

"The euro belongs to us all. It is just inconceivable that a country could
envisage dropping out of the euro," he added.

Top eurozone officials were already placed on the defensive last week after
Italian Social Affairs Minister Roberto Maroni - a member of the
euroskeptic Northern League - suggested Italy should reintroduce the lira.

That assertion was further questioned Monday by Italian reform minister
Roberto Calderoli - also a Northern League member - who suggested Rome
could return to the lira, or even create a new currency pegged to the US
dollar.

Before heading into Monday's meeting, Juncker said: "If we would discuss
all sorts of stupidities...we would have to add meetings to our meetings".

Dutch Finance Minister Gerrit Zalm rejected those suggestions, saying "I
don't think that it's a serious option for Italy to leave the eurozone - it
would be far too costly in terms of interest rates."

Rejecting the Italian ministers' comments as "irresponsible", Austrian
Finance Minister Karl-Heinz Grasser rallied to the defence of the euro,
insisting: "The euro and monetary union is one of the biggest successes
that we have with European integration and we will go on forward."

"It's a huge success, we all must see the progress we made (with the euro),
the positive effects that we're having in terms of as far as lower interest
rates, as far as lower inflation, as far as the increase in growth is
concerned," he added. - AFP /ch

http://www.channelnewsasia.com/
stories/afp_world_business/view/
151435/1/.html

www.chinaview.cn
2005-06-08

    ROME, June 7 (Xinhuanet) -- Italian Foreign Minister and Deputy Premier
Gianfranco Fini renewed Tuesday Italy's threat to veto the 2006 European
Union budget over proposed cuts to structural funds.

    Speaking at the Foreign Ministry, Fini said that Italy was working for
a compromise which would be acceptable to all the 25 member states, but
added that proposals from Luxembourg, which holds the EU rotating
presidency, were unacceptable.

    If these proposals are not modified, he warned, the Italian government
"will take the inevitable step" of vetoing the whole budget.

    Speaking last week to the presidents of Italy's southern regions, Fini
announced that Italy would veto the next EU budget if there were excessive
cuts in the structural funds it receives.

    Fini said Italy had rejected a proposal from Luxembourg which would
entail cuts of 7-8 billion euros for the southern regions.

    Italy is not alone in opposing cuts to structural funds, he added,
"because after France's rejection of the EU constitution, many national
governments feel it is now necessary to demonstrate to their citizens that
the EU is not against national interests, but the synthesis of these
interests."

http://news.xinhuanet.com/english/
2005-06/08/content_3056914.htm