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IMF warns Italy not to breach EU spending rules in next budget

IMF warns Italy not to breach EU spending rules in next budget

The International Monetary Fund has thrown its weight behind Brussels in its battle with Italy’s coalition government over plans to increase the indebted country’s borrowing in its next budget.

The Washington-based lender of last resort, which is holding its annual conference in Bali this week, warned Rome to abide by the EU’s financial rulebook or risk a rebellion by investors that could trigger a debt default.

Italy’s populist coalition is targeting a deficit of 2.4% of GDP next year, tripling the previous government’s target, as it pledges more spending despite a huge debt pile, which at about 130% of GDP is the biggest in the eurozone behind Greece.

Brussels has rejected the idea of Italy running a larger budget deficit – the gap between income from taxes and government spending – than previously planned over the next three years.