ZCZC
BCN-13
ITALY-BUDGET-FINANCE-EU
Italy cuts deficit targets in concession after EU pressure
ROME, Oct 4, 2018 (BSS/AFP) – Italy’s populist government bowed to
pressure from the European Union over its spending plans with an offer
Wednesday to taper budget deficit targets beyond 2020, as it looked to
reassure nervous markets.
Rome sparked disquiet last week by unveiling a budget that set the public
deficit at around 2.4 percent of gross domestic product (GDP) for the next
three years, earning a rebuke from the EU and stoking investor fears that
Italy’s mammoth debt could grow further.
Prime Minister Giuseppe Conte moved to row back slightly on Wednesday,
saying the country was now eyeing deficits of 2.1 percent in 2020 and 1.8
percent in 2021.
He had earlier vowed to speed up Italy’s efforts to reduce its public debt
which is at a sky-high level of 131 percent of GDP — the eurozone’s second
biggest after Greece.
The announcement came after Finance Minister Giovanni Tria said the
deficit would be squeezed after 2019 because Rome saw reducing public debt as
“fundamental”.
It was a sharp change in tack from Italy, after Deputy Prime Minister
Matteo Salvini on Tuesday threatened to seek damages from European Commission
president Jean-Claude Juncker for scaring off investors by attacking Rome’s
budget plans.
The yield on Italian government bonds has spiked higher in recent days,
with worried investors demanding more interest to hold onto Italian debt,
making it more expensive for Rome to borrow on international markets.
The closely-watched spread between the rates on 10-year bonds paid by
Italy compared with those offered by Germany, which is a measure of the added
risk perceived by investors to holding onto Italian debt, hit the highest
level in a month on Monday.
European Commissioner for Economic Affairs Pierre Moscovici, who angered
Rome earlier this week by urging it to tell Italian people the truth about
the need for sound spending, reinforced his criticisms Wednesday.
“The Italians have… chosen a resolutely eurosceptic and xenophobic
government that, on issues of migration and budget, is trying to get out of
its European obligations,” he said on the fringes of an OECD forum meeting in
Paris.
BSS/AFP/HR/0932