Italian government vows to respect 3% deficit rule

MATTEO BAZZI

Matteo Salvini speaks during a press conference in Milan, Italy, 12 June 2017.

Italian government vows to respect 3% deficit rule


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Deputy Italian prime minister Matteo Salvini vowed on Monday that Italy’s 2019 budget will slash taxes; however, he added, the budget would “brush” the EU’s 3% deficit ceiling, but will not breach it.

Salvini was contradicting his Economy Minister Giovanni Tria, who was reassuring investors on Monday that the Italian deficit would not be below 2%.

Last Friday Fitch Ratings changed Italy’s credit profile from “stable” to “negative,” prompting Luigi Di Maio to offer new reassurances to his voters.  “We can’t think about listening to the rating agencies and reassuring the markets, and then stab Italians in the back,” Di Maio is quoted saying.

The leader of the Five Star Movement (MS5) has promised a guaranteed universal income for all Italians to the tune of €780. He has vowed to keep this promise in the first budget of his government. Meanwhile, growth is decelerating and Salvini is promising a massive cut in income and corporation tax, as well as scrapping plans for a VAT hike.

On Monday the cost of Italian borrowing continued to climb, reaching 286 points compared to German 10-year bonds. That is double the yield Italy was paying in May.

The European Commission expects Italy to reign over its deficit and maintains its debt-to-GDP ratio on a downward trajectory.

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