Saturday 20 October 2018

Italian debt costs spike as Brussels scrap ratchets up

Italian Deputy Prime Minister Matteo Salvini. Photo: Reuters
Italian Deputy Prime Minister Matteo Salvini. Photo: Reuters

John Follain

Italian bonds and stocks tumbled yesterday as Italian deputy prime minister Matteo Salvini said Europe's real enemy is Jean-Claude Juncker and the Brussels bureaucracy that pushes budget restrictions and open borders.

Sitting alongside French nationalist Marine Le Pen at an event in Rome, Mr Salvini said that next year's European Parliamentary elections will be a showdown between those focused on creating jobs and those more concerned with imposing austerity like Mr Juncker, the president of the European Commission, and Pierre Moscovici, the EU's economic policy chief.

"We are against the enemies of Europe - Juncker and Moscovici - shut away in the Brussels bunker," Salvini said.

"The politics of austerity of the last few years has increased Italian debt and impoverished Italy."

As the Italian administration opens another front in its campaign against the European Union's core principles, investors are cranking up the pressure.

Italy's 10-year borrowing costs crossed 3.5pc for the first time since 2014 on Monday and traded at 3.59pc by mid afternoon in Rome.

The nation's benchmark FTSEMIB stock index fell to its lowest level since April 2017.

"I say to those who are thinking of speculating on the Italian economy that they are wasting time and wasting money because we will not go back," Mr Salvini said.

The populists setting the agenda in Italy are training their attacks on the European establishment as they prepare for the next battle over the 2019 budget.

Mr Salvini and his ally Luigi Di Maio are targeting next May's EU elections as a chance to roll back the budget rules that have cramped their style since taking office.

Mr Di Maio over the weekend promised the ballot will be an "earthquake".

He was in Berlin yesterday for talks with officials including Economy and Energy Minister Peter Altmaier.

Italian prime Minister Giuseppe Conte hosted the EU's chief Brexit negotiator Michel Barnier in Rome.

Mr Conte emphasised the need to secure the rights of EU citizens living in the UK - including 700,000 Italians - when Britain leaves the EU and Italy's interest in future co-operation on security, according to a statement from the Italian government.

Just a short distance across the Italian capital, Ms Le Pen was calling for a radical overhaul of EU structures to give national governments more say.

Mr Salvini and Mr Di Maio are trying to sustain the momentum behind their political takeover of Italy as their plans to cut taxes and ramp up benefit spending puts them on course for a collision with the EU budget police and the investors they need to finance their plans.

"If neither the EU or Italy back down, yields will continue to climb higher from here," said Jens Peter Sorensen, chief analyst at Danske Bank.

The Italian government must send a draft budget to Brussels by October 15 and EU officials have signalled that their plans will breach EU rules.

"What we see is worrying," Klaus Regling, the head of the European Stability Mechanism, said.

Bloomberg

Irish Independent

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