Italy’s ‘unprecedented’ budget spooks the financial markets
- Author: Darren Santiago Oct 22, 2018,
Oct 22, 2018, 0:25
The assessor noted that the country's public debt will remain around 130 percent of gross domestic product, "a level that makes Italy vulnerable to future domestic or externally-sourced shocks, in particular to weaker economic growth". Its resolve to breach European Union fiscal rules will be put to the test as it faces a rebuke from the European Commission, downgrades by credit rating agencies and a market sell-off that could negate the very stimulus it is hoping for.
"The most important thing is to explain the budget to our european counterparts", said the head of the government, Giuseppe Conte, while the european Commission has called for "clarifications" prior to Monday noon on the budget that comes out largely of nails in europe. Neither side has any incentive to back down at present.
The draft Italian budget is extremely concerned in Brussels.
European Union officials have long signaled it will be very hard for the commission not to reject Italy's spending plans if the government's targets remained unchanged. Italian bonds were closed at the time of the announcement.
The EU presidency says it "is really, really decisive" for Italy to change its draft budget because otherwise Italy would not only threaten its own financial health for also that of its eurozone partners.
"The economic plans of the government, while supportive of growth in the near term, do not amount to a coherent programme of reforms that will lift Italy's mediocre growth performance on a sustained basis", it said.
The anti-establishment 5-Star has always opposed amnesties - a frequently used policy in Italy where people or companies can avoid being pursued for tax dodging by paying a fee.
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While in Seoul , Pompeo will meet with President Moon Jae-in and Foreign Minister Kang Kyung-wha. In the past few days, North Korea has also renewed its demands for sanctions to be eased.
Italian Minister of Foreign Affairs and International Cooperation Enzo Moavero Milanesi, right, shakes hands with EU Commissioner for Economic and Monetary Affairs Pierre Moscovici on the occasion of their meeting at the Foreign Ministry Farnesina Palace in Rome, Friday, Oct. 19, 2018.
While Italy's deficit is well within the 3 per cent limit laid out in treaties, the Commission has demanded smaller gaps for Italy to bring down its debt load.
The government Tale is projecting a deficit of 2.4% of GDP in 2019, compared to 0.8% for its predecessor, and then to 2.1% in 2020 (compared with 0), and 1.8% in 2021.
The government's budget plan targets a decrease of the deficit to 2.1 per cent in 2020 and 1.8 per cent in 2021.
The EU commission has the task of checking if budget plans stick to EU rules.
Moody's said the planned measures should boost the country's output, but predicted that they would have less impact than the government was predicting.
"It is of course correct that sanctions come late and the process to sanctions is long", Wolff said.