Eu­ro­zone bat­tles Italy as EU row deep­ens

The Phnom Penh Post - - BUSINESS -

EU­RO­ZONE fi­nance min­is­ters firmly warned Italy on Mon­day to abide by EU rules on publ ic spend i ng, a s Rome ac­cused Brus­sels of eco­nomic “ter­ror­ism”.

The war of words took place just days af­ter Rome an­nounced a big spend­ing boost in de­fi­ance of the EU that has spooked the mar­kets and has EU cap­i­tals fear­ing a re­turn of the debt cri­sis.

“I’m some­what less op­ti­mistic af­ter hav­ing talks with col­leagues than be­fore­hand,” said Dutch Fi­nance Min­is­ter Wopke Hoek­stra af­ter a meet­ing with his eu­ro­zone coun­ter­parts on the is­sue.

“If this was meant to test the wa­ter, then it seems like work has still to be done,” he added.

The frag­ile state of Italy’s econ­omy has reawak­ened mem­o­ries of the cri­sis amid dan­gers that Rome could face puni­tive mea­sures by its EU part­ners if it in­sisted on break­ing the bloc rules on run­ning ex­ces­sive deficits and high debt.

Fall­out from the bud­get plans shook mar­kets again on Mon­day, with the close­ly­watched “spread” be­tween the rates on 10-year debt paid by Italy com­pared with those of­fered by Ger­many hit­ting a month high.

“It is up to the Ita lian gov­ern­ment to show that it has a s u s t a i nable a nd c r e d i ble bud­getar y pla n,” sa id Eu­rogroup chief Mario Cen­teno, who is also Por­tuguese fi­nance min­is­ter.

Italy on Thurs­day drafted a bud­get that raises spend­ing, pushes the pub­lic deficit to around 2.4 per cent of gross do­mes­tic prod­uct and that will hike the pub­lic debt above its al­ready sky high level of 131 per cent of GDP.

The prev ious gov­ern­ment was aim­ing for a def icit of 0.8 per cent of GDP t hat would help cut debt though pos­si­bly ham­per eco­nomic grow th.

“I just want to make very clear that there are rules and the rules are the same for ev­ery state be­cause our fu­tures are l i nked,” said French Fi­nance Min­is­ter Bruno Le Maire.

Given the grow­ing worry, Le Ma i re a nd Hoek st r a had re­quested that Italy be put on the agenda, sources said.

In the talks sources said Ital­ian Fi­nance Min­is­ter Gio­vanni Tria strug­gled to de­fend Rome’s bud­get plan amid ru­mours that he had re­cently con­sid­ered re­sign­ing on ob­jec­tions to his gov­ern­ment’s tough stance.

Tr ia u rged h is Eu ro­pea n part­ners to “stay calm” ahead of t he sit­dow n pla nned for Lux­em­bourg.

“I will try to ex­plain what is hap­pen­ing and our in­ten­tions,” he said.

Mar­ket ‘ter­ror­ism’

EU Eco­nomic Af­fairs Com­mis­sioner Pierre Moscovici will be tasked with as­sess­ing the Ital­ian bud­get, which is to be of­fi­cially sub­mit­ted to Brus­sels on Oc­to­ber 15 and could be re­vised be­fore then.

Moscovici warned Rome to tell the truth to the Ital­ian peo­ple about the need for sound spend­ing, a warn­ing that drew a fu­ri­ous ac­cu­sa­tion from Rome that the for­mer French fi­nance min­is­ter was pro­vok­ing the mar­kets.

“There are Euro­pean in­sti­tu­tions play­ing at bring­ing ter­ror­ism to the fi­nan­cial mar­kets,” said Italy’s deputy prime min­is­ter Luigi Di Maio who heads the pop­ulist Five Star Move­ment (M5S).

“This morn­ing, ob­vi­ously, some­one was not happy that the spread had not in­creased . . . Mr Moscovici woke up and thought about mak­ing state­ments against Italy to fuel ten­sions on the mar­kets,” Di Maio told re­porters in Rome.

Moscovici said these re­marks “made no sense. What I am do­ing is re­mind­ing of the rules”.

Mar­kets were a lso desta­bilised on re­ports t hat Tria was go­ing to go home early from t he Lu xem­bou r g meet i ng i n or­der to con­fer wit h his gov­ern­ment.

Guil­laume Le­feb­vre, a bond man­ager at Quil­vest Ges­tion in Paris said: “We can fear that the tug of war with Brus­sels is only be­gin­ning and ex­pect more volatil­ity.”

Newspapers in English

Newspapers from Cambodia

© PressReader. All rights reserved.