Italian Economy Minister Giovanni Tria pledged on Sunday that the coalition will respect EU fiscal rules. And, more progressive budget plans would only be introduced gradually. The programs include both a new welfare tool advocated by the Five Star Movement and tax cuts promoted by the League. But he emphasized that “almost all reforms will start to be implemented gradually.” And, “we are looking into Italy’s big state balance sheet to find financial resources to be shifted toward these measures.”
Also, he acknowledge the need to bring down the 130% debt to output ratio, which is the second highest in Eurozone. And such reduction “may bring about a strengthening and consolidation of Italy’s presence on financial markets, which will free up resources and attract investments.”He added “it makes no sense to seek two or three billion euros of extra deficit if we then have to pay three or four billion more due to higher yields”. Further, “as the government puts words into actions, the (bond yield) spread will return to more normal levels.”
Italian 10 year yield dipped notably from August high at 3.281 after the coalition government pledged not to break the bank. But, currently above 3%, it’s still notably higher than 1.75-2.00% range before the coalition took office.
