Italy’s populist Government now appear more open to reducing its draft budget deficit, easing some of the concern amongst investors.
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The European Commission has rejected a draft budget due to the fact that it contains a sharp increase in spending and deficit. The deficit would reach 2.4% of Gross Domestic Product (GDP) a substantial increase on the previous Government’s 0.8%.
Deputy Prime Minister, Luigi Di Maio said the following:
“If during the process, the deficit has to be reduced a bit, it is no big deal.”
“The important thing is that not one single person misses out on the pledged measures.”
This was said when asked about the universal income and pension reform promised by the coalition.
The Italian Government has previously refused to change it’s stance on the budget which it has stated is crucial to boosting growth. It seems Head of the European commission Jean-Claude Junker’s attempt to change the opinion of Italian Prime Minister Giuseppe Conte is working.
Co-Deputy Prime Minister, the Head of League, Matteo Salvini has said the Government is committed to using “good sense”, he also added “We are not interesting in arguing with Europe.”
The potential for a reduction in deficit will sit well with Brussels as well as investors although I think this situation is far from over.
Consumer Price Index (CPI) data is released tomorrow and can cause volatility on the markets. It is a measure of inflation and can influence monetary policy decisions. There is expected to be little movement from last month’s 1.1%, however if the figures come in away from expectations expect movement on the exchange.
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