Tutto bene: Italy seeks to reassure markets over budget

Italy’s new anti-establishment government sought to reassure financial markets about its upcoming budget on Sunday amid increasing concern Rome could breach EU spending limits as it comes under pressure to fulfil its anti-austerity electoral promises.

Tutto bene: Italy seeks to reassure markets over budget
Italian finance minister Giovanni Tria. Photo: AFP

With Italy’s debt currently standing at a whopping 132 percent of output, financial markets appear to be increasingly nervous about the ability of the new populist government to get its finances under control. 

On Friday, the so-called “yield spread” — which measures the difference in perceived risk between Italian and ultra-safe German government bonds — was wider than it has been in the past 12 months.

But in an interview with La Repubblica newspaper on Sunday, Italian finance minister Giovanni Tria insisted that the spread would narrow once Rome unveiled its budget plans.

“Italy isn’t fragile. It isn’t the sick man of Europe,” Tria said.

“The government has already said several times that budget stability will be respected. And with the new budget law in the coming weeks, these intentions will be translated into action,” the minister said, in comments made during a visit to China.

“As a result, the spread will narrow.”

Nevertheless, international rating agencies appear sceptical.

On Friday, Fitch lowered its outlook on Italy’s sovereign debt rating from “stable” to “negative”, meaning that it could be downgraded in the future.

“Following the formation of the country’s new coalition government, (Fitch) expects a degree of fiscal loosening that would leave Italy’s very high level of public debt more exposed to potential shocks,” the rating agency said in a report.

“The risk of a reversal of structural reforms negatively impacting Italy’s credit fundamentals has increased somewhat, in our view,” Fitch said.

“Fiscal and other policy risks are compounded by the relatively high degree of political uncertainty.”

On Friday, EU Economic and Monetary Affairs Commissioner Pierre Moscovici, also urged Rome to make a “significant effort” on its 2019 budget, warning he expected talks with the government to be difficult.


Italy’s Renzi wants ex-ECB boss Draghi to become prime minister: report

Ex-PM Matteo Renzi would like to see former European Central Bank chief Mario Draghi become prime minister of Italy, a party source told Reuters on Sunday.

Italy's Renzi wants ex-ECB boss Draghi to become prime minister: report
Matteo Renzi. Image: Andreas Solaro/ POOL / AFP

“I would say that is one of our proposals,” confirmed the source, who declined to be named.

The Italian government collapsed last week when PM Giuseppe Conte resigned. The former coalition allies are currently trying to come to an agreement and sort out their differences.

The centre-left government had been in turmoil ever since former premier Matteo Renzi withdrew his Italia Viva party earlier this month, a move that forced Conte to step down this week.

During the past year, Renzi frequently criticised Conte’s management of the pandemic and economic crisis.

Italy’s La Stampa newspaper also reported on Sunday that President Sergio Mattarella was considering Draghi for the prime ministerial role. However, Mattarella’s office promptly denied this, saying there had been no contact between them.

So far, there has been no comment from Draghi, who hasn't been seen much in the public eye since 2019.

Italy's president, Sergio Mattarella, gave ruling parties more time on Friday to form a new government, after the resignation of Prime Minister Giuseppe Conte. 

Coalition parties Italia Viva, the centre-left Democratic Party (PD) and anti-establishment 5-Star Movement must come to an agreement to allow the government to heal. 

Renzi, a former prime minister himself, has pubilcly stated that he does not want to talk about who should lead the next government at this stage, reasoning that the parties need to agree on a way forward first.

“Any effort today to fuel a discussion about Draghi is offensive to Draghi and above all to the president of the republic,” Renzi said in an interview published on Sunday with Corriere della Sera.

A senior Italia Viva lawmaker also told Reuters that “If the president gives a mandate to Draghi, we would certainly support this”. 

Renzi, whose party is not even registering three percent support in opinion polls, quit the coalition over Conte’s handling of the COVID-19 pandemic and his plans for spending more than 200 billion euros from a European Union fund to help Italy’s damaged economy.

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