Italy's top ministers look to reassure markets over 2019
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[September 05, 2018]
By Giuseppe Fonte and Angelo Amante
ROME (Reuters) - Italy's top ministers
issued a barrage of statements on Wednesday to reassure financial
markets over the government's forthcoming budget, promising to keep
state accounts in check and maintain economic stability.
The concerted charm campaign helped push Italian bond yields to their
lowest in almost a month, as hopes grew that the coalition, comprising
the rightist League and anti-establishment 5-Star Movement, would
respect European Union budget discipline.
"Clearly we will not do everything in one shot, not even Italians expect
that from us ... If we want to run the country for a long period we
cannot blow up its public accounts," Deputy Prime Minister Matteo
Salvini told the newspaper Il Sole 24 Ore.
Investors have sold off Italian bonds since the government took office
in June, on concern that the coalition may implement policies that would
increase the country's already-huge debt and breach EU fiscal rules.
But after a summer filled with promises of imminent radical action,
ministers have changed their tune this week, following credit ratings
agency Fitch's decision cut its outlook for Italian debt -- the third
largest in the world..
League leader Salvini met his fellow deputy prime minister, Luigi Di
Maio, and Prime Minister Giuseppe Conte on Wednesday to discuss the 2019
budget, which has to be issued by mid-October and which will be the
government's first major legislation.
"The budget law will be courageous and will keep accounts in order," Di
Maio, who is also the 5-Star leader, told reporters afterwards. "Here,
we have people saying we want to wreck the accounts and destroy Europe."
BUSINESS LOBBY RELIEVED
He said the package would include key campaign promises, such as
introducing a so-called "universal income" for the unemployed, watering
down a 2011 pension reform and tax cuts.
However, he echoed Salvini by saying the coalition planned to govern
over the long term, suggesting policies would be implemented gradually.
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Italy's Interior Minister Matteo Salvini gestures as he speaks
during a news conference at the Viminale in Rome, Italy, June 25,
2018. REUTERS/Tony Gentile/File Photo
Salvini told Il Sole that priority would be given to rolling back the unpopular
pension reform that raised the minimum retirement age. He added that tax cuts
would be implemented gradually and would initially favor small businesses.
Italy's business lobby Confindustria welcomed his comments. "It seems that
deputy prime minister Salvini's words show a move towards great responsibility,"
said Confindustria chief Vincenzo Boccia.
The coalition is due to deliver Italy's latest economic growth and public
finance targets at the end of the month, before the full budget.
Under EU rules, no country should have a budget deficit greater than 3 percent
of GDP product or debt above 60 percent of GDP. Italy's debt amounts to more
than 130 percent, the second highest in Europe after Greece, making it
vulnerable to market pressure.
Economy Minister Giovanni Tria, an academic who is not a member of either of the
governing parties, is pushing to keep next year's deficit below 2 percent of
GDP, sources said on Monday.
A League source said on Tuesday that Salvini wanted the government to accept a
deficit "a bit above" 2 percent. Di Maio said the issue was not broached on
A fresh budget meeting was called for Thursday.
($1 = 0.8659 euros)
(Writing by Giselda Vagnoni; editing by Crispian Balmer, Larry King)
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