Italy’s budgetary plans for the 2019 fiscal year have unnerved financial markets. The Lega/Five Star Movement governing coalition, which came into power with the promise of a comprehensive program of extra public expenditure, has approved a substantial upward revision to the 2019 budget deficit target to 2.4% of gross domestic product: 3 times higher than the 0.8% figure agreed by the previous administration with the European Commission. The deficit targets for 2020 and 2021 are 2.1% and 1.9%, respectively.
To say that EU authorities are displeased would be an understatement. Yields on Italian bonds, which had been on a rising trend since the installation of the populist administration, have shot up further, sparking fears that an open confrontation between Rome and her eurozone partners could be the beginning of another systemic crisis for the euro.
Jose Garcia-Zarate does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.