Mounting concern over Italy’s budget

The government’s budget plans for 2019 in Italy are causing concern and have sparked a sell-off of state bonds. The Italian government offered a budget with a deficit of 2.4 per cent of GDP for the next three years.

Concern has thus mounted that this budget not only puts Italy on a collision course with the European Commission but that indeed it cements the fact that the government is not committed to tackling the country’s immense debt pile.

The figure of 2.4 per cent marks a political victory for Luigi Di Maio and Matteo Salvini who had to overcome the resistance of Economy Minister Giovanni Tria, an unaffiliated technocrat, whose department had forecast that a 2019 deficit above 1.9 per cent would put at risk the containment of Italy’s debt; already the highest in Europe after Greece.

Analysts have already speculated that the budget might also go down poorly with ratings agencies. Italy’s rating is a particular concern, as the country is only two notches above the dividing line between investment grade and junk.