Austrian Chancellor Kurz says Commission must reject Italian budget

EPA-EFE/JULIEN WARNAND

Austrian Chancellor Sebastian Kurz speaks to media as he arrives for the Asem 12, Asia-Europe Meeting in Brussels on October 19, 2018.

Austrian Chancellor Kurz says Commission must reject Italian budget


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In response to the more upbeat and conciliatory tone of Eurogroup President Mario Centeno and European Economic Affairs Commissioner Pierre Moscovici, both of whom reiterated that a crisis between Brussels and Rome was not in either’s best interest and that an agreement on an acceptable pro-growth 2019 draft budget for Italy was on the horizon, Austria’s right-wing chancellor, Sebastian Kurz, took a more combative tone on October 22, saying the European Commission must flatly reject Italy’s budget proposal and refuse to negotiate until the Italian government presents a proposal for next year’s budget that conforms to EU norms.

“Austria is not prepared to stand up for the debts of other states while these states knowingly contribute to uncertainty in the financial markets,” Kurz said, adding that the EU must show that it learned its lessons from the near-decade-long Greek crisis.

Italy’s 10-year bond (BTP) bond spread fluctuated on October 22, compared to the German Bund. The BTP closed at just under 300 basis points (299), having dropped to 282 earlier in the day, which was lower than the 301 basis points on October 19. The overall yield is now 3.45%.

Although Moody’s has downgraded Italy’s sovereign debt profile, it kept the country’s outlook to stable and at investment grade. Since January, international lenders have offloaded €42.8 billion in 10-year Italian bonds.

The Italian government submitted a 2019 draft proposal with a 2.4% of GDP deficit target, a major increase from the 0.8% agreed with the previous centre-left government.

An opinion poll published on October 21 suggests that 60% of Italians support the Italian budget and are convinced that higher levels of debt are necessary to stimulate Italy’s economy, the third largest in the European Union after Germany and France.

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