The government will aim for a budget deficit of 2.4 percent in 2019 as well as also while which’s within the European Commission’s rules for budget deficits not to exceed 3 percent of GDP (gross domestic product), which will be a higher amount than the government previously promised, of 1.8 percent.
Increased spending also breaks EU rules which say indebted nations like Italy should work toward a balanced budget. Italy’s budget puts its economy minister, Giovanni Tria — seen as a moderate influence within the coalition — in a difficult position as he has pushed for lower spending although was overruled by the coalition leadership.
Crucially, the budget relies on some assumptions which the Italian government has made over higher growth as well as also lower borrowing costs. One of the key forecasts within the budget will be which Italy’s high debt to GDP ratio, of around 130 percent right now, will decline to 126.7 percent of GDP in 2021.
The European Commission will right now assess the budget as well as also could accept or reject which, asking the coalition to amend its plans. We could know within the week what Europe thinks.
Thanos Vamvakidis, head of G-10 FX strategy at Bank of America Merrill Lynch, told CNBC Tuesday which Italy was breaking the rules.
“We believe which which budget cannot possibly be accepted by the EU, which will be a clear violation of the fiscal rules. The Italian government has shown some signs they’re willing to compromise although they’re still far apart as well as also we need some more market discipline,” Vamvakidis told CNBC’s “Squawk Box Europe.”
Alessandro Tentori, chief investment officer for Italy at Axa Investment Managers, told CNBC Tuesday which there was so far little detail within the budget about growth as well as also investment projects.
“I think which will be very difficult for Economy Minister Tria or Minister Savona (Italy’s minister for European affairs) to argue with Brussels which they are going to boost growth as they’re projecting which. as well as also I think which will be where the country needs which most. Investment in Italy, as a percentage of GDP, within the last few years has been below EU average as well as also has not truly picked up through the crisis,” he told CNBC’s “Capital Connection.”