UPDATE 1-EU seeks clarifications over Italy budget, new row unlikely

The European Commission said Italy's draft budget for next year could be in breach of European Union fiscal rules and it asked for clarification from the Italian government by Wednesday, in a letter sent to Finance Minister Roberto Gualtieri. The EU's move is seen as a necessary step, given Italy's plans to spend more to boost growth, although it is unlikely to lead to a repeat of the standoff between Brussels and Rome seen last year.

Back then the Commission forced Italy's former eurosceptic government to amend its budget to avoid sanctions after a prolonged tussle that hit markets. The letter, dated Oct. 22 and signed by economic commissioners Valdis Dombrovskis and Pierre Moscovici, said a preliminary assessment of the 2020 draft budget showed that it fell short of EU fiscal recommendations to reduce expenditure.

"Italy's plan does not comply with the debt reduction benchmark in 2020," the letter said. Last week, Moscovici in an interview with Reuters preannounced that Italy's budget could require some work, but was far from being seen as a major problem.

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