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The Prime Minister of the Italian coalition, showed no sign of hesitation in his determination to advance his budget proposals. Even if the leaders of the euro zone and the European Union (EU) in Brussels claim that these plans go against the budgetary rules designed to support the euro.
Giuseppe Conte, Italian Prime Minister. Photographer: Marlene Awaad / Bloomberg
The EU and Italy currently disagree with the deficit target announced by the Italian populist government last month. & nbsp; The Italian government announced in September that it expects to accumulate a budget deficit of 2.4% of GDP, 0.4% more than the European limit and a rate three times higher than the target set by the previous government. center left.
The proposed budget has angered the EU in its request to Italy to explain its plans for spending, taxes and loans.
However, the Italian Prime Minister replied:
"… I have already said, there is no reason why we should change purpose. … "
The coalitions of Deputy Prime Ministers Matteo Salvini (League) and Luigi Di Maio (Five Star Movement) may be more difficult for the EU. They expressed their willingness to seek stimulus measures to revive the Italian economy. Italy has continued to struggle since the global financial crisis of 2008.
To convince the Italians, the EU is ready to play a leading role in expressing its disapproval of the Italian financial plan. For example, the Commissioner for Economic Affairs, Pierre Moscovici, said after a meeting with the Italian Minister of Finance, Giovanni Tria,
"… In our letter, we ask the government to get closer to the European rules because it can not stay with a deficit of 2.4% and with a structural deficit of one and a half point … … is not possible, we ask for a correction … "
However, he also quickly indicated that Brussels knew that the potential solution was the continuation of the diplomatic dialogue, unlike a heated dispute. Mr. Moscovici added:
"… we do not want confrontation, we do not care about escalating events. … Through constructive dialogue, markets will be reassured. … It's the constant dialogue that will improve the financial situation … "
On the other hand, the President of the European Commission, Jean-Claude Juncker, issued a less cordial note. He strongly warned that if the EU gave way to Italy's extravagant spending, it would risk losing "… violent reaction …" other countries in the euro area.
In an interview with the Italian ANSA press agency, Mr Juncker said:
"… Warnings may have been given prematurely, but nothing has been decided yet and everything will depend on what comes out of our conversations with the Italian government. … If we accept the Italian government's proposals, we would have a violent reaction from the eurozone states. … What is the euro? First of all, it protects us. If Italy did not have the euro, the country would be in a bad situation. … The euro must be managed with solidarity and collective principles. It's a unique currency. … "
If the EU thought the case of Brexit was difficult, they should really pay attention to the way they treat Italians.
A survey conducted on behalf of the & nbsp; European Commission (Eurobarometer) revealed. Only 44% of Italians now think that Italy has benefited from its membership of the EU.
The survey revealed that Italy was now at the bottom of the list of countries that thought the EU had benefited them. At least the UK had a 53% majority (oh, irony) of respondents who supported the EU. What is perhaps even more worrying is that the poll has placed Italy among the leading countries with doubts that the EU has benefited the country.
If there is to be a European official who can appeal to the Italian government for it to stop running on the way to ruin, it is one of theirs.
The third and current President of the European Central Bank (ECB), Mario Draghi, is a son of Rome. Last week, he launched a complaint against Italian governments, he said. should leave no illusions that the ECB would come to the rescue by acquiring new amounts of Italian bonds in order to limit yields.
Mario Draghi, President of the European Central Bank (ECB), photographer: Jasper Juinen / Bloomberg
He is right to draw attention to the evolution of Italian bond yields, as yesterday (19th), contrary to what Mr Moscovici said, the 10-year Italian government bond spread on Germany reached 322 basis points (3.22%), compared with 306 basis points on 12th Octoberth . The average spread of the last 12 months is only 166 basis points and this week's closing is the highest since March 29th.th 201.3 when the level was 349 basis points.
The level of economic growth is essential to the current government's budget plans. They forecast 1.5% for 2019, half a point higher than the best estimate of the financial market. The Banca D'Italia (Bank of Italy) criticized the governments' forecasts as it had declared on 19 October.th as the economy grew only 0.1% in the third quarter of 2019, compared with 0.2% in the second quarter. The bank said the credibility of the central government's spending program was entirely dependent on the level of confidence expressed by savers and the wider Italian public finance market.
Markets have taken into account Draghi's warning as yields / spreads rise and rating agencies question the health of Italian banks' balance sheets. Fitch said balance sheets were under heavy pressure because of the high exposure to Italian sovereign debt.
"… Italian banks are directly exposed to the sovereign through their holdings of debt securities of Italian governments, because larger spreads on these debt instruments lead to erosion of capital …"
One would like to think that the power of ECB President Mario Draghi could give an idea of the reality to the League and the five-star coalition. Perhaps leave some room for reworking their budget before Monday, when Rome will have to address EU concerns.
However, I do not fear because it seems that, although Luigi Di Maio, the leader of the Five Star Movement is not to shoot:
"… The reaction of the market will not affect the course of the government …"
He is also irritated by the fact that some budget clauses seem to have been changed without his knowledge.
Mr. Di Maio said that one of the measures budgeted, an amnesty for fraudsters and money launderers, had been amended to become a broader amnesty for those guilty of certain financial crimes.
He claimed that it was, "… a fudge by a mysterious hand," & nbsp; He added that he would report to prosecutors and threatened his five-star colleagues with not supporting the budget in a parliamentary vote scheduled for early November.
One of these MPs (who seeks anonymity) said that:
"… such as the amnesty for financial criminals goes against everything we defend …"
On the other hand, the League claims that Five-Star knew absolutely everything that was written in the budget sent to Brussels.
As many say about Britain, it can be said for Italy … what are the chances of a reasonable agreement with the EU, if the government is at odds with itself.
Mario Draghi, a rather cool-headed Roman, must in some way feel revived, he is far from Rome and very far from Frankfurt.
Stephen Pope ~ MarketMind
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The Prime Minister of the Italian coalition, showed no sign of hesitation in his determination to advance his budget proposals. Even if the leaders of the euro zone and the European Union (EU) in Brussels claim that these plans go against the budgetary rules designed to support the euro.
Giuseppe Conte, Italian Prime Minister. Photographer: Marlene Awaad / Bloomberg
The EU and Italy currently disagree with the deficit target announced by the Italian populist government last month. The Italian government announced in September that it expects to accumulate a budget deficit of 2.4% of GDP, 0.4% more than the European limit and an incredible three times higher than the target set by the previous center-left government.
The proposed budget has angered the EU in its request to Italy to explain its plans for spending, taxes and loans.
However, the Italian Prime Minister replied:
"… I have already said, there is no reason why we should change purpose. … "
The coalitions of Deputy Prime Ministers Matteo Salvini (League) and Luigi Di Maio (Five Star Movement) may be more difficult for the EU. They expressed their willingness to seek stimulus measures to revive the Italian economy. Italy has continued to struggle since the global financial crisis of 2008.
To convince the Italians, the EU is ready to play a leading role in expressing its disapproval of the Italian financial plan. For example, the Commissioner for Economic Affairs, Pierre Moscovici, said after a meeting with the Italian Minister of Finance, Giovanni Tria,
"… In our letter, we ask the government to get closer to the European rules, because it can not remain at a deficit of 2.4% and a structural deficit of a point and a half … This is not possible, we ask for a correction … "
However, he also quickly indicated that Brussels knew that the potential solution was the continuation of the diplomatic dialogue, unlike a heated dispute. Mr. Moscovici added:
"… we do not want confrontation, we do not care about escalating events. … Through constructive dialogue, markets will be reassured. … It's the constant dialogue that will improve the financial situation … "
On the other hand, the President of the European Commission, Jean-Claude Juncker, issued a less cordial note. He strongly warned that if the EU gave way to Italy's extravagant spending, it would risk losing "… violent reaction …" other countries in the euro area.
In an interview with the Italian ANSA press agency, Mr Juncker said:
"… Warnings may have been given prematurely, but nothing has been decided yet and everything will depend on what comes out of our conversations with the Italian government. … If we accept the Italian government's proposals, we would have a violent reaction from the eurozone states. … What is the euro? First of all, it protects us. If Italy did not have the euro, the country would be in a bad situation. … The euro must be managed with solidarity and collective principles. It's a unique currency. … "
If the EU thought the case of Brexit was difficult, they should really pay attention to the way they treat Italians.
A survey conducted on behalf of the European Commission (Eurobarometer) revealed. Only 44% of Italians now think that Italy has benefited from its membership of the EU.
The survey revealed that Italy was now at the bottom of the list of countries that thought the EU had benefited them. At least the UK had a 53% majority (oh, irony) of respondents who supported the EU. What is perhaps even more worrying is that the poll has placed Italy among the leading countries with doubts that the EU has benefited the country.
If there is to be a European official who can appeal to the Italian government for it to stop running on the way to ruin, it is one of theirs.
The third and current President of the European Central Bank (ECB), Mario Draghi, is a son of Rome. Last week, he launched a complaint against Italian governments, he said. should leave no illusions that the ECB would come to the rescue by acquiring new amounts of Italian bonds in order to limit yields.
Mario Draghi, President of the European Central Bank (ECB), photographer: Jasper Juinen / Bloomberg
He is right to draw attention to the evolution of Italian bond yields, as yesterday (19th), contrary to what Mr Moscovici said, the 10-year Italian government bond spread on Germany reached 322 basis points (3.22%), compared with 306 basis points on 12th Octoberth . The average spread of the last 12 months is only 166 basis points and this week's closing is the highest since March 29th.th 201.3 when the level was 349 basis points.
The level of economic growth is essential to the current government's budget plans. They forecast 1.5% for 2019, half a point higher than the best estimate of the financial market. The Banca D'Italia (Bank of Italy) criticized the governments' forecasts as it had declared on 19 October.th as the economy grew only 0.1% in the third quarter of 2019, compared with 0.2% in the second quarter. The bank said the credibility of the central government's spending program was entirely dependent on the level of confidence expressed by savers and the wider Italian public finance market.
Markets have taken into account Draghi's warning as yields / spreads rise and rating agencies question the health of Italian banks' balance sheets. Fitch said balance sheets were under heavy pressure because of the high exposure to Italian sovereign debt.
"… Italian banks are directly exposed to the sovereign through their holdings of debt securities of Italian governments, because larger spreads on these debt instruments lead to erosion of capital …"
One would like to think that the power of ECB President Mario Draghi could give an idea of the reality to the League and the five-star coalition. Perhaps leave some room for reworking their budget before Monday, when Rome will have to address EU concerns.
However, I do not fear because it seems that, although Luigi Di Maio, the leader of the Five Star Movement is not to shoot:
"… The reaction of the market will not affect the course of the government …"
He is also irritated by the fact that some budget clauses seem to have been changed without his knowledge.
Mr. Di Maio said that one of the measures budgeted, an amnesty for fraudsters and money launderers, had been amended to become a broader amnesty for those guilty of certain financial crimes.
He claimed that it was, "… a fudge by a mysterious hand," He added that he would inform prosecutors and threatened his five-star colleagues not to support the budget during a parliamentary vote scheduled for early November.
One of these MPs (who seeks anonymity) said that:
"… such as the amnesty for financial criminals goes against everything we defend …"
On the other hand, the League claims that Five-Star knew absolutely everything that was written in the budget sent to Brussels.
As many say about Britain, it can be said for Italy … what are the chances of a reasonable agreement with the EU, if the government is at odds with itself.
Mario Draghi, a rather cool-headed Roman, must in some way feel revived, he is far from Rome and very far from Frankfurt.
Stephen Pope ~ MarketMind
