Italy rattles markets on debt crisis fears

By Ian King, business presenter
Italian shares and government bonds have fallen, along with the euro, after the country's ruling coalition agreed a budget that will see borrowing rise next year by more than expected.
The decision potentially sets Rome on a collision course with both Brussels and financial markets.
The coalition government, formed in June between the anti-establishment Five Star Movement and the hard-right League, agreed overnight to run a budget deficit next year equal to 2.4% of Italian GDP.That is significantly higher than the 1.6% deficit for which the country's finance minister, Giovanni Tria, had been pushing.Mr Tria, who is unaffiliated to either party, said earlier this week that Italy "must give a sign to those who lend us money".Italian newspapers reported this morning that Italy's president had had to persuade Mr Tria not to resign.
Italy rattles markets on debt crisis fears

Italian finance minister Giovanni Tria reportedly had to be persuaded not to resign
Italy's national debt stands at 131% of GDP, making it the most indebted nation in the eurozone, other than Greece.Under EU rules, originally agreed in the Maastricht Treaty in 1991, members of the EU must not run a budget deficit any higher than 3% of GDP.The budget agreed on Thursday night means that Italy will not break those rules - but it will renege on a promise the country made to Brussels to curb its borrowing.The previous centre-left government, led by Matteo Renzi, had previously targeted a budget deficit of just 0.9% of GDP for 2019 and was looking to balance the books by 2020.However, with the Italian public tired of an erosion in living standards after years of austerity, both the Five Star Movement and the League were elected on platforms implying significant increases in borrowing.The League had called for aggressive tax cuts while the Five Star Movement had demanded big increases in benefit payments for the lower paid.Both parties also agreed that there was a need for a big increase in spending on infrastructure following the collapse of a motorway bridge in Genoa in August that caused the deaths of 43 people.
Italy rattles markets on debt crisis fears

The Morandi bridge in Genoa collapsed last month
Among the decisions agreed in the budget are tax cuts. Some €10bn will also be set aside to pay a 'citizen's income' of €780 a month for the poorest 6.5 million Italians.Reforms introduced in 2011, raising the retirement age, will also be reversed in a move that the government hopes will encourage 400,000 Italians to retire earlier and create job vacancies that can be filled by younger people.Matteo Salvini, the leader of the League and Luigi di Maia, leader of the Five Star Movement, said in a joint statement that it was "a budget for change".However, Italian assets have sold off sharply, amid concerns that the budget will spark a clash with the EU.
See also:
Leave a comment
  • Latest
  • Read
  • Commented
Calendar Content
«    Август 2020    »