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DEBT

New investor confidence boosts Italian economy

Interest on Italian and Spanish debt fell to record low on Monday, while Portugal's continued to drop, as investor concerns about the eurozone's former laggards eased.

New investor confidence boosts Italian economy
Borrowing costs for southern European countries have fallen since the European Central Bank brought in unprecedented measures in June. Money photo: Shutterstock

Borrowing costs for southern European countries have fallen since the European Central Bank brought in unprecedented measures in June to help boost weak inflation in the bloc.

Investors have also been cheered by upbeat data, with Italy's borrowing costs touching a new low of 2.666 percent, down from 2.714 percent.

"The fact that these rates continue to decline and there is no reversal shows that nobody sees issues that are likely to push yields higher," said Patrick Jacq, a bond strategist at BNP Paribas.

The improving sentiment marks a sharp turnaround from recent years when investors feared Italy and Spain could join Greece and Portugal in needing an international bailout.

Sentiment towards Portugal has also improved in recent weeks after its credit rating was upgraded by Moody's ratings agency thanks to its improving public finances.

"The market accepts that the country is moving away from a critical situation," said Jacq.

Italians too are becoming more positive about their economy, as a report published last week found consumer confidence up in the second quarter of 2014. Italy still however has a long way to go, registering the fourth-lowest consumer confidence score in Europe.

READ MORE: Italians more confident about money matters

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BUDGET

Salvini vows not to yield to Brussels in Italy budget dispute

Italy's Deputy Prime Minister Matteo Salvini vowed Saturday not to back down in a dispute with Brussels over the country's budget as Rome scrambles to avoid EU punishment for failing to reduce its heavy public debt load.

Salvini vows not to yield to Brussels in Italy budget dispute
Matteo Salvini at a press conference following last week's European elections. Photo: AFP

The EU infuriated Rome this week by warning over its soaring debt, rekindling a process that could eventually see Italy hit with sanctions for breaking spending promises to the EU.

“Next week I will tell Brussels 'let us do what Italians request: fewer taxes and more jobs',” Salvini said during a political rally.

“And if they say 'no', we'll see who is more stubborn,” he added.

The country's public debt stands at 132.2 percent of GDP in 2018.

This is well above the 60 percent threshold set by European rules and next week the European Commission is expected to recommend opening an “excessive deficit procedure” as punishment.

Italy's populist coalition — Salvini's far-right League and the anti-establishment Five Star Movement (M5S) — told the commission late Friday it will review both the country's tax system and public spending.

“The government is setting up a comprehensive program to review the current spending” ahead of the budget law for 2020, Finance Minister Giovanni Tria said in a reply to Brussel's request for an explanation over Italy's finances.

The government will also review Italy's revenue, including taxes, Tria said.

The opening of the EU procedure, which needs to be validated by EU finance ministers, could result in financial sanctions of up to 0.2 percent of Italian GDP, equivalent to three billion euros.

READ ALSO: The biggest winners and losers in Italy's EU election results

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