Italy EU Budget Show Down

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Italy EU Budget Show Down

I hope Italy succeeds where Greece failed. Perhaps they will have learned from them. What do you think. Will Italy hold its ground?

"We won't subtract one single euro from the budget," Salvini told reporters during a visit to Bucharest. "I personally am available to go even tomorrow to meet the President of the European Commission to explain how Italy's economy will grow thanks to this maneuver. But no-one will take one euro from this budget."

The plan, tabled late last month, increases spending to meet a number of key campaign promises from the League and its left-ish coalition partner the Five Star movement. They include tax cuts, a basic income for the unemployed, and rolling back the retirement age.

If a new budget can't be agreed upon, the European Commission will open an excessive deficit procedure investigation, a disciplinary process that could eventually lead to sanctions or expulsion from the EU. Although levying such punishments against the bloc's third-largest economy might be self-defeating.

What seems more likely is that the markets will be used to try and bring the populists to heel. Italian bonds have already been falling for the better part of a week, and the government's borrowing costs will further increase if the European Central Bank stops or slows its interventions.

Some sort of face-saving agreement seems like the most likely outcome. After all, France is being permitted to run an even larger deficit in 2019, equal to 2.6 per cent of GDP.

The wildcard remains Salvini, who owes much of his popularity to his anti-EU stance and has more to gain by for an all-out conflict than compromise.

Offensive yet revealing appropriate terminalogy: bring the populists to heel


They aren't even shy about it:

"From this perspective, our view is that market tensions would need to intensify in order to exert sufficient pressure on the Italian political system to trigger a change in the policy path and the political rhetoric around it.

"On that basis — and even if Italy does ultimately remain part of the Euro area — the market situation may need to get worse before it gets better," she added.

Sounds like an open plan to hurt Italy's economy to force them to heel.