Italy: Spending plans do not comply with EU rules – Deutsche Bank

Analysts at Deutsche Bank point out that the Italian government officially replied to the European Commission’s letter asking for clarification on several budget points.

Key Quotes

“Finance Minister Tria said that he knows that Italy’s spending plans do not comply with EU rules, but that he wants "constructive" talks on the issue and that the government will stand ready to ensure its 2019 budget deficit doesn’t exceed its 2.4% target.”

“Contrary to speculation in press on Friday, there were no indications that Italy might lower its headline deficit to a more fiscally-sustainable target of 2.1% of GDP. The EU may implement the never-before-used step of demanding revisions to the budget as soon as today.”

“Contrary to last week, there were limited signs of contagion today, with Spanish spreads tightening -2.8bps, though the euro depreciated 0.43% versus the dollar. The greenback rallied to its strongest level in 2 months, gaining +0.33%, with gains coming against both developed and emerging market currencies.”