Tyler Cadenas | October 10, 2018
The International Monetary Fund (IMF) has major disagreements with Italy’s plan to increase it’s borrowing next year. Italy currently borrows 130% of its GDP, second only to Greece in the EU.
The IMF has pushed Italy to reevaluate its decision to increase borrowing rates. Critics of Italy’s government have claimed that failure to follow EU budgeting regulations will lead to an inability to repay debts to investors.
Critics such as this have a dramatic effect on the Italian and EU economy as a whole; investors are less likely to purchase bonds attached to a failing economy, which hurts the government’s economy even more. It’s this repetitive cycle that the IMF is trying to prevent as part of its goal to ensure economic security throughout the world.
Interestingly enough, Italy and Greece spend the most compared to GDP in the EU, and also just happen to be migrants first and second choices to enter the EU from. Asylum seekers are shuffling through Turkey into the Mediterranian states such as Greece and Italy to seek entrance into the EU. The influx of migrants is tied directly in with the continually-increasing borrow deficit that plagues Italy and Greece.
Rome is to submit a reevaluated borrowing plan for EU approval. Executives from the IMF have claimed that a confident market in Italy is paramount to a stable EU when an impending Brexit develops.
Italy is open to discussion during this period of economic recession. Italy Finance Minister Giovanni Tria reported that he wanted to begin, “constructive discussions” with the EU. Clearly, Italy is aware of the predicament that they’re in. Even so, Tria has admitted that Italy’s plans to increase borrowing have resulted in equity markets falling and bond yields rising, which has proven to be damaging to the Italian economy.
“Although so far there hasn’t been an explosion as some feared, we are of course worried,” Tria claimed, “As a responsible government, we aim to explain the budget and thus guide investors in our meetings in order to calm markets.”