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Italy budget: European Commission demands changes

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The European Commission has told Italy to revise its budget, an unprecedented move with regard to an EU member state. The Commission is worried about the impact of higher spending on already high levels of debt in Italy, the eurozone’s third-biggest economy.

The controversy surrounding the Italian government’s spending plans has led to continued nervousness on the financial markets. The budget set out by the country’s coalition government last month – which involves greater spending than previously planned – had already sent Italian share prices lower and knocked the value of the euro.

The cost of government borrowing for Italy, represented by the yield (or interest rate) on its bonds (the debt issued by the Italian government), has been rising, demonstrating that investors are getting twitchy.

Markets are concerned that the government’s plans mean the country is heading for a stand-off with the European Commission.

Italy’s governing populist parties have vowed to push ahead with campaign promises including a minimum income for the unemployed.

The country now has three weeks to submit a new, draft budget to Brussels.

The Commission said the first draft represented a “particularly serious non-compliance” with its recommendations.

The Commission Vice-President for the euro, Valdis Dombrovskis, said Italy’s response to the commission’s concerns was “not sufficient” to assuage fears – and the euro’s rules were the same for everybody.

“This is the first Italian budget that the EU doesn’t like,” wrote Deputy Prime Minister Luigi Di Maio on Facebook. “No surprise: This is the first Italian budget written in Rome and not in Brussels!”

His co-deputy PM Matteo Salvini added: “This doesn’t change anything.”

“They’re not attacking a government but a people. These are things that will anger Italians even more,” he said

Source: BBCB

 

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