Italy’s Minister of Economy Giovanni Tria believes the government’s 2.4% deficit target for 2019, which was rejected by the European Commission, is both economically sound and the logical course of action if the country wants to stimulate its sagging economy
“We cannot afford not to have a deficit either economically or socially,” said Tria, who added, “we are convinced that (the deficit) is not just sustainable, but it is responsible.”
The government expects its economic policy to yield 1.5% of GDP growth in 2019, largely as a result of instituting a minimum wage of €780 per month that will boost consumer spending.
Tria acknowledging that Italy is experiencing a slowdown in economic growth, but argued that growth cannot naturally accelerate without a budget stimulus.
Meanwhile, Banca d’Italia Governor Ignazio Visco warned of the serious consequences for families and banks should bond yields remain at current levels for a prolonged period of time. Visco emphasised that households hold around €100 billion of state bonds as savings and lenders hold €850 billion in reserve with a value that is now being suppressed. He also pointed out that Italy may be called to pay an additional cost to service its debt of €5 billion a year.
“Italy’s public debt is sustainable, but there must be a clear determination to keep it that way,” said Visco, adding that the Italian government cannot afford to raise the deficit.