Italian Growth and Revised Budget to Reignite EU Tension

The Italian finance ministry is set to release updated fiscal plans Wednesday, with analysts contemplating another dispute with the EU and volatility in the country’s bond market.

According to press reports over the weekend, the plans are likely to show a revised 2019 budget deficit and growth of just 0.3% for this year — down from an earlier 1.0% prediction. For 2020, the numbers are expected to show a deficit of 2.1% of its gross domestic product, from a previous 1.8% target.

The new deficit targets could be wider than the circa 2% number agreed with the European Commission — the EU’s executive arm — toward the end of last year.

Things came to a head between Rome and Brussels last fall after Italy’s coalition government announced a draft budget for 2019 of 2.4%, which would have breached Maastricht Treaty requirements and opened up the possibility of an infringement procedure.

After a tense couple of months, the Italian finance ministry eventually revised the 2019 deficit forecast to 2.04% to avoid sanctions. Financial assets recovered with 10-year bond yields falling back after hitting highs of 3.68% in October. Yields move inversely to sovereign debt prices.

via CNBC

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