Italy bows to EU, cuts its deficit targets
ITALY’S populist government will bow to pressure from Brussels and reduce its budget deficit targets for 2020 and 2021 in a bid to reassure skittish markets, two Italian dailies reported Wednesday.
After declaring last week it was setting the public deficit at around 2.4 per cent of gross domestic product (GDP) for the next three years, Rome now plans to reduce the targeted gap to 2.2 per cent in 2020 and 2.0 per cent in 2021, the Corriere della Sera and Repubblica dailies said.
Prime Minister Giuseppe Conte had sought to assuage concerns over the budget late Tuesday, by vowing to speed up Italy’s efforts to reduce its public debt which is at a skyhigh level of 131 per cent of GDP.
The government has agreed to work to lower debt levels “consistently over three years”, Conte said in a statement after meeting other top ministers to discuss the issue.
He gave no numbers however, and officially the government said it would follow through with i t s or iginal plans.
Conte and the leaders of Italy’s coalition parties, the farright League and anti-establishment Five Star Movement, were set to meet again to discuss the issue further on Wednesday.
On Tuesday, League head Matteo Salvini, who is a deputy prime minister, threatened to seek damages from European Commission president Jean-Claude Juncker for scaring off investors by attacking the budget plans.
The yield on Italian government bonds has spiked higher in recent days as worried investors demand more interest to hold onto Italian debt.
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, also rose.
It hit t he highest level in a month on Monday amid fears that Ita ly’s mammoth debt – the eurozone’s second biggest a f ter Greece – cou ld g row even f urt her.
Eurozone finance ministers on Monday warned Ita ly to abide by EU rules on public spend i ng , j u s t day s a f t er Rome announced a big spending boost in def iance of Brussels.