Friday 24 May 2019

Salvini out to 'change Europe' with fiscal rule vow

Salvini aims to boost jobs by spending. Photo: Bloomberg
Salvini aims to boost jobs by spending. Photo: Bloomberg

John Follain

Italian Deputy Premier Matteo Salvini is seeking to take back the initiative in the European election campaign - triggering a new bout of market turbulence in the process.

Under pressure from his coalition partner and sometime rival ahead of the ballot on May 26, the head of the rightist League issued his most direct challenge yet to the European establishment fiscal rules and vowed "to change this Europe completely".

"If we need to break some limits, like the 3pc or the 130-140pc, we'll go ahead," Mr Salvini told reporters in the League's northern stronghold Verona, a reference to restrictions on budget deficits and government debt. "Until unemployment is halved in Italy, until we reach 5pc, we'll spend everything that we have to spend."

Italian bonds tumbled for a third day, pushing German yields to the lowest level since 2016, amid concerns of a renewed budget battle. Italy's two-year yields surged 11 basis points to 0.79pc, the highest level since December.

With a debt-to-GDP ratio eclipsed only by Greece within the euro area, Italy is the financial time bomb that keeps policymakers awake at night and after a decade of failed fixes, Salvini and his populist allies in the Five Star Movement took power last year with a mandate to try to spend their way out of trouble.

The European Commission headed off a first attempt to do that in December. Mr Salvini's comments suggest officials and investors should strap in for a rerun.

Mr Salvini said earlier this month that taxes should be cut even if it breaches EU rules.

"If someone in Brussels complains, that's not our problem," Salvini said. The fiscal rules are "outdated, old and imposed without any sense by the EU," he told Italian daily 'Corriere' della Sera in an interview published Wednesday.

Bloomberg

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