European Central Bank Warns Against Italy's Big-spending Plans
Umer Jamshaid Published May 24, 2018 | 07:24 PM
The European Central Bank said Thursday that Italy should stick to EU budget rules rather than pump up spending, warning that financial markets could punish the country's new government for recklessness
Frankfurt am Main, (UrduPoint / Pakistan Point News - 24th May, 2018 ) :The European Central Bank said Thursday that Italy should stick to EU budget rules rather than pump up spending, warning that financial markets could punish the country's new government for recklessness.
"A loosening of the fiscal stance in high-debt countries could impact the fiscal outlook and, by extension, market sentiment" towards governments when they try to sell bonds, the ECB said in its biannual financial stability report.
Departing central bank Vice-President Vitor Constancio was more explicit, telling reporters "Italy should keep within the European rules regarding fiscal policy" because "it's in its own interest", according to Bloomberg news.
Italy is the third-largest economy in the eurozone and labours under a 2.3-trillion-euro ($2.7-trillion) government debt burden, 132 percent of its annual economic output. That ratio is the highest of any EU nation aside from Greece, and more than double the official EU limit of 60 percent.
The country must turn to investors to refinance hundreds of billions of Euros of its debt in the coming years, and could be forced to pay higher interest rates if markets are not convinced it has sound finances.
But a coalition deal between the anti-establishment populist Five Star Movement and eurosceptic League parties could see the budget deficit -- the amount the government outspends its income -- surge as it promises tax cuts, a monthly basic income and rollbacks to money-saving pension reforms.
For now, EU Economic Affairs Commissioner Pierre Moscovici saw Thursday a "fairly good sign" in Italian prime ministerial nominee Giuseppe Conte's openness to "dialogue" with the bloc's executive arm.
"I continue to believe Italy will remain a core country of the eurozone," he added. Looking at the 19-nation eurozone more broadly, minutes from the ECB's April meeting released Thursday showed governors were convinced slower economic performance at the start of the year was temporary.
"The underlying growth momentum was on the whole assessed to remain intact," the minutes read. But "uncertainty surrounding the outlook had increased," policymakers agreed, concerns reflected by President Mario Draghi when he announced the ECB would stick to its mass bond-buying (QE) and low interest rate policies.
"Risks relating to global factors, including the risks of protectionism, have become more prominent," Draghi said in late April in a nod to the rising risk of trade conflict between the EU and US President Donald Trump's administration.
Related Topics
Recent Stories
Govt bringing reforms in energy, revenue collection, SOEs: Aurangzeb
Pakistan, New Zealand to face off in 2nd T20I match at Rawalpindi today
Currency Rate In Pakistan - Dollar, Euro, Pound, Riyal Rates On 20 April 2024
Today Gold Rate in Pakistan 20 April 2024
Tennis: ATP Barcelona Open results - 1st update
Swiatek's perfect 10 in Stuttgart as Vondrousova stuns Sabalenka
Arandu's roads closed due to flooding
Oil tanker catches fire in Islamabad’s Blue Area
Pakistan committed to ensure safety of foreign nationals: FO
Tennis: WTA Stuttgart results - 1st update
Four passengers injured as train hit an empty vehicle
Over- speeding bus crushed to death two bike riders
More Stories From Business
-
Govt bringing reforms in energy, revenue collection, SOEs: Aurangzeb
1 hour ago -
Currency Rate In Pakistan - Dollar, Euro, Pound, Riyal Rates On 20 April 2024
5 hours ago -
Today Gold Rate in Pakistan 20 April 2024
6 hours ago -
Pakistan aims to agree outline of new IMF loan in May - Finance Minister
16 hours ago -
FTO commends FBR's role for prompt resolution of tax payers’ issues
16 hours ago -
BISP embraces E-procurement: launches inaugural tender
18 hours ago
-
Business community indebted to Ahsan Zafar for his unprecedented services: Yousuf Rajput
18 hours ago -
China auto sector steps up Europe push with Spain plant
18 hours ago -
Condolence reference held in memory of FBR's officials
19 hours ago -
Health activists ring alarm bells over 10-stick cigarette pack
20 hours ago -
Karachi receives maiden direct flight of Azerbaijan Airlines from Baku
20 hours ago -
PSX turns bullish, gains 619 points
20 hours ago