Italy's Matteo Renzi brushes off talk of EU mocking over budget

Italian Prime Minister Matteo Renzi brushed off suggestions of tensions with the EU on Friday after newspapers accused senior officials of smirking at a news conference when asked if Rome may be granted extra flexibility on its budget targets.

European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy told journalists in Brussels that all countries would have to respect budget commitments.

They appeared to laugh slightly when asked if there could be room for Italy to fund growth-creation measures through deficit spending, prompting angry accusations in the Italian press that they were mocking the suggestion.

"I found the reports quite far from reality," Renzi told reporters after an EU council meeting, saying that Italy met all its commitments and was not asking for favours.

"This submissive, supine attitude, saying that you are coming cap in hand to Brussels is something I will never have," he said, adding that governments had to restore recession-weary citizens' confidence in European institutions.

However the reaction in Italy reflected questions over how well Renzi's fast-talking style and his promises to end the austerity policies which have dominated the EU's response to the euro zone debt crisis will go down in Brussels.

The controversy overshadowed reassuring messages from the summit about Renzi's economic reform agenda, which includes promises of sweeping tax cuts and spending programmes to boost growth but has raised doubts over how they will be funded.

"No those smiles will not do at all," the Corriere della Sera, Italy's most influential daily, said in a front page editorial, echoed in other papers. "They are a gratuitous slap in the face. An offence that Italy does not deserve."

Van Rompuy's spokesman Dirk De Backer dismissed the controversy and the coverage by Italy's press.

"It's a deliberate misinterpreting of a smile. Van Rompuy and Barroso only wanted to coordinate on who had to answer to the journalist. The stories in the press do not deserve further comment," he said.

Renzi has promised that Italy, struggling to emerge from its worst postwar recession, with unemployment at record levels, will meet its budget commitments, including keeping its deficit under the EU cap of 3 percent of gross domestic product.

However, he has pledged measures including 10 billion euros in income tax cuts to low earners, swift repayment of tens of billions of euros in debt arrears owed by the public sector to private companies and heavy investment in schools, all to be funded by extra borrowing and so-far undefined spending cuts.

He has also made clear he believes the budget restrictions should be overhauled, describing the 3 percent limit this week as "anachronistic".

The EU Commission has expressed concern Italy was missing a target of keeping its structural budget deficit, adjusted for the business cycle, inside 0.5 percent even before Renzi announced last week that he wanted to increase borrowing.

The smiles by Barroso and Van Rompuy recalled a similar exchange of looks between German Chancellor Angela Merkel and former French President Nicholas Sarkozy at a European Council meeting in 2011 in response to a question about the then-prime minister Silvio Berlusconi.

"They're laughing at Renzi too," Il Giornale, a newspaper owned by the Berlusconi family, headlined its front page.

Berlusconi's centre-right party has never forgotten the perceived slight and has brought it up repeatedly to support its argument that the billionaire media magnate was forced from office at the height of the euro zone debt crisis in 2011 by pressure from Berlin and Brussels.

On Thursday, Sandro Gozi, the undersecretary in charge of European Union Affairs, said Italy wanted to see a discussion about granting extra room for manoeuvre on deficits to fund spending on infrastructure.

Italy's public debt is one of the highest in the euro zone at around 133 percent of GDP, but its deficit is within the limits of the Stability and Growth Pact and it runs a primary surplus, before interest rate payments.

(Writing by James Mackenzie; Editing by Tom Heneghan and Robin Pomeroy)