Europe Italy’s top ministers look to reassure markets over 2019 budget

Italy’s top ministers look to reassure markets over 2019 budget

Deputy Prime Minister Matteo Salvini

Italy’s top ministers issued a barrage of statements on Wednesday to reassure financial markets over the government’s forthcoming budget, promising to keep state accounts in check and maintain economic stability.

The concerted charm campaign helped push Italian bond yields to their lowest in almost a month, as hopes grew that the coalition, comprising the rightist League and anti-establishment 5-Star Movement, would respect European Union budget discipline.

“Clearly we will not do everything in one shot, not even Italians expect that from us … If we want to run the country for a long period we cannot blow up its public accounts,” Deputy Prime Minister Matteo Salvini said.

Investors have sold off Italian bonds since the government took office in June, on concern that the coalition may implement policies that would increase the country’s already-huge debt and breach EU fiscal rules.

But after a summer filled with promises of imminent radical action, ministers have changed their tune this week, following credit ratings agency Fitch’s decision cut its outlook for Italian debt — the third largest in the world..

League leader Salvini met his fellow deputy prime minister, Luigi Di Maio, and Prime Minister Giuseppe Conte on Wednesday to discuss the 2019 budget, which has to be issued by mid-October and which will be the government’s first major legislation.

“The budget law will be courageous and will keep accounts in order,” Di Maio, who is also the 5-Star leader, told reporters afterwards. “Here, we have people saying we want to wreck the accounts and destroy Europe.”

He said the package would include key campaign promises, such as introducing a so-called “universal income” for the unemployed, watering down a 2011 pension reform and tax cuts.

However, he echoed Salvini by saying the coalition planned to govern over the long term, suggesting policies would be implemented gradually.

Salvini told Il Sole that priority would be given to rolling back the unpopular pension reform that raised the minimum retirement age. He added that tax cuts would be implemented gradually and would initially favor small businesses.

Italy’s business lobby Confindustria welcomed his comments. “It seems that deputy prime minister Salvini’s words show a move towards great responsibility,” said Confindustria chief Vincenzo Boccia.

The coalition is due to deliver Italy’s latest economic growth and public finance targets at the end of the month, before the full budget.

Under EU rules, no country should have a budget deficit greater than 3 percent of GDP product or debt above 60 percent of GDP. Italy’s debt amounts to more than 130 percent, the second highest in Europe after Greece, making it vulnerable to market pressure.

Economy Minister Giovanni Tria, an academic who is not a member of either of the governing parties, is pushing to keep next year’s deficit below 2 percent of GDP, sources said on Monday.

A League source said on Tuesday that Salvini wanted the government to accept a deficit “a bit above” 2 percent. Di Maio said the issue was not broached on Wednesday.

A fresh budget meeting was called for Thursday.

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