Italy's Salvini appears to be on another collision course with EU over budget sums

Italy's Salvini appears to be on another collision course with EU over budget sums

The Italian government looks sets to another collision course with the European Union as the commission seemed set to impose sanctions on the country over its budget deficit, sending Italian bond yields sharply higher.

The announcement by the commission that a so-called excessive feficit procedure for Italy could eventually be warranted came as little surprise, Capital Economics in London said, but added that "investors appear to have been spooked".

It said at one stage that the Italian 10-year bond rose by a significant 10 basis points to 2.6% on the news.

"Most of this gap could be closed if Italy increased Vat next year – the commission estimates that this would raise 1.3% of GDP in revenue.

"But both coalition parties are strongly against raising the sales tax for fear that it would depress the economy.

"Making matters worse is Deputy Prime Minister Matteo Salvini’s renewed insistence on a 'fiscal shock' centered on tax cuts," the economics firm said.

It added: "Italy is on another collision course with the EU that looks set to push bond yields up and weigh on economic activity."

Mr Salvini appeared to reject the commission's advice.

“With cuts, sanctions and austerity, the levels of debt, poverty, insecurity and unemployment have increased,” Mr Salvini said. “We must do the opposite,” he said.

In the latest round of reports for all EU governments, Economics Commissioner Pierre Moscovici said: “With this last spring package of our mandate, we reaffirm our commitment to an intelligent application of the Stability and Growth Pact. That means basing our decisions not on a mechanistic or legalistic application of the rules, but on whether they are good for growth, jobs and sound public finances."

More on this topic

CRH 'prepares to sell €1.7bn distribution arm'CRH 'prepares to sell €1.7bn distribution arm'

IMF blog post on corporation tax poses challenge for IrelandIMF blog post on corporation tax poses challenge for Ireland

Providence Resources shares rise on Barryroe funding optimismProvidence Resources shares rise on Barryroe funding optimism

Grafton Group shares fall as conditions weaken in core UK marketGrafton Group shares fall as conditions weaken in core UK market

More in this Section

China’s economy growth cools further amid US tariff warChina’s economy growth cools further amid US tariff war

Lufthansa slams Ryanair fare policyLufthansa slams Ryanair fare policy

Young savers need to raise interestYoung savers need to raise interest

Wicklow farmer has healthy oils market sussed outWicklow farmer has healthy oils market sussed out


Lifestyle

2FM DJ Ciara King in conversation with Hilary Fennell.How Ciara King made the adjustment from late night radio to weekend mornings

Newsflash: Crunches aren’t the best exercises for starting work on your six-pack. Liz Connor sources top tips for getting a toned tum for summer.5 ways to get better abs – according to Lucy Mecklenburgh’s personal trainer Cecilia Harris

Ella Walker speaks to chefs about the working environments they’ve experienced, and why traditional kitchen behaviours are now thoroughly outdated.We talk to real chefs about ‘shouty’ kitchen culture – and how it’s got to change

Picky eaters could be a thing of the past with this hack.Food writer Jack Monroe has the most genius way of getting her son to eat (almost) everything

More From The Irish Examiner