Wednesday, 14 November, 2018

Italy’s Debt Is Edging Closer to Junk After Moody’s Downgrade

Italy's Interior Minister Matteo Salvini gestures during a news conference with Prime Minister Giuseppe Conte after to approve a new decree of the measures on immigration and security at Chigi Palace in Rome Italy Arrivederci Merkel: Salvini Talks Bavaria Elections European Politics REUTERS Alessandro Bianchi
Kenny Thornton | 21 October, 2018, 17:51

This comes after Italy's government announced its budget for the next fiscal year, with a projected deficit of 2.4 percent of GDP - exceeding that of the previous budget threefold.

The budget drew stinging criticism from the EU's top economic affairs officials, who penned a letter to Rome describing the plans as "unprecedented" and warning that Brussels does not rule out rejecting the entire budget.

German Chancellor Angela Merkel, at a meeting with Conte on Wednesday, called for "positive dialogue" between Italy and the European Union on the budget.

"There is no discrimination against Italy", Moscovici said during a press conference alongside Tria.

With planned higher deficits, debt levels will remain at a "level that makes Italy vulnerable to future domestic or externally-sourced shocks, in particular to weaker economic growth", Moody's said.

Italy is the Eurozone's third-largest economy, and its budget problems are felt across the bloc to a far greater extent than, for example, the debt problems in Greece back in 2015.

He wasn't the only critic, with former Eurogroup chief, Jeroen Dijsselbloem, warning that an Italian budget crisis would lead to an "implosion" within the country's fragile banking sector.

Pope ready to visit Pyongyang if invited: S.Korea's Moon
He spends Wednesday meeting with Italian leaders and attending an evening "Mass for Peace" in St. Moon arrived in Rome on Tuesday on a three-day official visit to Italy and the Vatican .

Concerns over Rome's expansive budget plans have weighed heavily on Italian government bonds in recent weeks, with the spread between German and Italian benchmark 10-year paper hitting 5-1/2 year highs on Friday.

Echoing Merkel, Rutte said reforms were "always good", but that implementing them did not give a state an excuse to increase its deficit beyond what was agreed in the stability and growth pact. Moody's said the Italian government's budget plans are raising concern over the sustainability of its national debt.

The 5-Star Movement leader, Luigi Di Maio, insists that the draft contains unauthorized changes to extend a tax amnesty to Italians with bank accounts overseas.

Juncker said: "I had some colleagues on the phone say they don't want us to add flexibility to already existing flexibility".

"We as the European Union are not prepared to take on this risk, these debts for Italy", Prime Minister Sebastian Kurz of Austria, which holds the rotating EU presidency, said Friday. He told a late-night talk show that the draft budget presented to President Sergio Mattarella's office contained a proposal to extend a tax amnesty on money held overseas and brought back to Italy.

Matteo Salvini, the leader of the League party, called the accusation "surreal". The 5-Star Movement opposes such a move, fearing possible money laundering. He denied a rift in the governing coalition.

The European Commission said Italy's spending plans are excessive and asked for an explanation, the first step in what threatens to become a full-blown standoff between Brussels and Rome.

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