Italy’s ‘unprecedented’ budget spooks the financial markets

Italy’s ‘unprecedented’ budget spooks the financial markets

Italy's euroskeptic government is pushing for a reduction of tensions between the European Union and Russian Federation but risks isolation in Brussels as EU partners seek instead stronger measures to deter Moscow from interfering in EU affairs. In addition, the letter also noted that the budget proposal could even see it being rejected by the EU.

Meanwhile, the Italian government is supposed to reply to the European Commission's letter on Monday.

Italy's opposition to cyber sanctions has contributed to a softening of the wording of the final joint summit document which in its last draft version says work "should be taken forward" on cyber defenses "through European Union restrictive measures".

Italy's Prime Minister defended its free-spending budget on Thursday, brushing off criticism from Brussels as the European Commission stepped up pressure over a draft it labelled an unprecedented breach of EU fiscal rules.

Yields on Italian benchmark 10-year bonds spiked after elections in March [IT527480=].

Before the meeting, Austrian Chancellor Sebastian Kurz said fiscal rules should be respected by all.

But the country's populist coalition government has done the opposite - offering a draft budget that boosted overall spending.

"I can not imagine a Europe without Italy or Italy without Europe", Moscovici said.

Tria said the European Union and Italy have different views about the country's policies and he hoped "with dialogue" these views would "come closer together".

The government's budget plan targets a decrease of the deficit to 2.1 per cent in 2020 and 1.8 per cent in 2021.

"We [the commission] were very kind, gentle, and positive, when it came to Italy, because Italy is Italy", Juncker said, adding that in the last three years Rome was able to €30bn more without sanctions by the EU's stability rules.

Deputy Prime Minister Luigi Di Maio, who heads the Five Star Movement, blamed Brussels for the movement, saying in a video posted on his Facebook page that the spread widened "because the markets think that the government is no longer united".

The leaders of Italy's ruling coalition parties accused each other on Friday of misleading voters over a disputed tax amnesty in their most acrimonious falling-out since they formed a government in June.

Luigi Di Maio told a late-night talk show that the draft presented to the Italian president contained a proposal to extend a tax amnesty on money held overseas and brought back to Italy.

Italian prime minister Giuseppe Conte held bilateral meetings with the Dutch, German and French leaders.

He said the 5-Star, founded by comedian Beppe Grillo, was working to present in January-February a programme that brought together similar grassroots movements from other European countries with the goal to "give back a heart and humanity to European institutions".

According to the version published by the Ministry of Finance earlier this week, Italy's draft budget introduces a basic income for the poor of 780 euros a month, a "citizens' pension" of 780 euros a month, to be paid for mostly by deficit spending equal to 2.4 percent of gross domestic product (GDP).

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