Italy’s budget in back in the spot light again today and trigger rather steep decline in European stocks, Euro and German bund yield. The center of the storm is that Economy Minister Giovanni Tria, who belongs to neither party of the coalition, insists on capping 2019 budget deficit at 2.0% of GDP. It’s believed the the Treasury already forecasts that deficit above 1.9% of GDP would risk debt containment.
On the other hand, Luigi Di Maio of the Five Star Movement is pushing for 2.4% deficit for fulfilling the party’s election promise. And that is being supported by coalition partner League leader Matteo Salvini. A cabinet meeting will be help today on the issue while Di Maio will also meet Prime Minister Giuseppe Conte
The development is still very fluid. There has been rumors that Tria threatened to resign if he’s forced to raise deficit above 2% but there’s no confirmation. Riccardo Molinari, head of League lawmakers in the lower house of parliament warned “if Tria is no longer part of the project, we’ll find another finance minister.” So 2% or 2.4%, or anything in between? Tria to stay, to be forced out or to quite voluntarily? These are all the questions that cannot be answered right now.
German 10 year bund yield hit as low 0.484 earlier today and is now back at 0.515.
