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BCN-07
ITALY-BUDGET-EU
Italy seeks to reassure markets over budget
ROME, Sept 3, 2018 (BSS/AFP) – Italy’s new anti-establishment government
sought to reassure financial markets about its upcoming budget on Sunday amid
increasing concern Rome could breach EU spending limits as it comes under
pressure to fulfil its anti-austerity electoral promises.
With Italy’s debt currently standing at a whopping 132 percent of output,
financial markets appear to be increasingly nervous about the ability of the
new populist government to get its finances under control.
On Friday, the so-called “yield spread” — which measures the difference
in perceived risk between Italian and ultra-safe German government bonds —
was wider than it has been in the past 12 months.
But in an interview with La Repubblica newspaper on Sunday, Italian
finance minister Giovanni Tria insisted that the spread would narrow once
Rome unveiled its budget plans.
“Italy isn’t fragile. It isn’t the sick man of Europe,” Tria said.
“The government has already said several times that budget stability will
be respected. And with the new budget law in the coming weeks, these
intentions will be translated into action,” the minister said, in comments
made during a visit to China.
“As a result, the spread will narrow.”
Nevertheless, international rating agencies appear sceptical.
On Friday, Fitch lowered its outlook on Italy’s sovereign debt rating from
“stable” to “negative”, meaning that it could be downgraded in the future.
“Following the formation of the country’s new coalition government,
(Fitch) expects a degree of fiscal loosening that would leave Italy’s very
high level of public debt more exposed to potential shocks,” the rating
agency said in a report.
“The risk of a reversal of structural reforms negatively impacting Italy’s
credit fundamentals has increased somewhat, in our view,” Fitch said.
“Fiscal and other policy risks are compounded by the relatively high
degree of political uncertainty.”
On Friday, EU Economic and Monetary Affairs Commissioner Pierre Moscovici,
also urged Rome to make a “significant effort” on its 2019 budget, warning he
expected talks with the government to be difficult.
BSS/AFP/HR/0950