Italian Yields Tumble, Bank Stocks Soar As Populists Blink In Showdown With EU -

Italian Yields Tumble, Bank Stocks Soar As Populists Blink In Showdown With EU

Nov 26, 2018Jeremy ParkinsonFinance0

That didn’t take long.

Two days after boldly threatening to take down Italy’s populist-led government should lawmakers try to change the 2.4% projected budget deficit that has locked Italy into a geopolitical staring contest with the European Commission, Deputy Prime Minister Matteo Salvini has become the first to blink.

Salvini, the deputy minister who is effectively in charge of Italy’s government (a view confirmed by opinion polls), told Italian media for the first time on Monday that his government would be “open” to a lower deficit spend after an anonymous official said the government was looking at changes to the budget plan’s deficit target. Last week, the European Commission roiled Italian markets when it issued an unprecedented rejection of Italy’s 2019 budget planned and started preparing for an “Excessive Debt Procedure” against its third-largest economy – a proceeding that could lead to billions of euros of fines against the already-struggling Italian government.

As a reminder, here’s how the EDP would play out if members of the Eurogroup decide to approve the proceeding:

Salvini told AdnKronos that “nobody is fixated” on the deficit target, and that it was more important to pass a budget that would fund the social-welfare expansions that the Italian government is planning – from increases to pension benefits to the controversial “citizen’s income” that would put up to 780 euros a month into the pockets of the poorest Italians.

Earlier, Deputy Premier Matteo Salvini told AdnKronos that next year’s shortfall in finances could be lower than the government’s target. Asked about the 2.4 percent target, Salvini reportedly told the newswire: “I think nobody is fixated on this, if there is a budget which makes the country grow, it could be 2.2 percent or 2.6 percent.”

Salvini spoke ahead of a budget meeting set for 7:30 pm Rome time (1:30 pm ET) where he would discuss the budget plan with Prime Minister Giuseppe Conte, Five Star Movement leader and fellow Deputy PM Luigi Di Maio and Economy Minister Giovanni Tria.