{"id":2378,"date":"2018-10-10T23:41:53","date_gmt":"2018-10-10T23:41:53","guid":{"rendered":"http:\/\/baileyonlineclassroom.com\/europeandrussiablog\/?p=2378"},"modified":"2018-10-10T23:41:53","modified_gmt":"2018-10-10T23:41:53","slug":"imf-warns-italy-not-to-breach-eu-spending-rules-in-next-budget","status":"publish","type":"post","link":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/2018\/10\/10\/imf-warns-italy-not-to-breach-eu-spending-rules-in-next-budget\/","title":{"rendered":"IMF warns Italy not to breach EU spending rules in next budget"},"content":{"rendered":"

The International Monetary Fund has thrown its weight behind Brussels in its battle with Italy\u2019s coalition government over plans to increase the indebted country\u2019s borrowing in its next budget.<\/span><\/p>\n

The Washington-based lender of last resort, which is holding its annual conference in Bali this week, warned Rome to abide by the EU\u2019s financial rulebook or risk a rebellion by investors that could trigger a debt default.<\/span><\/p>\n

Italy\u2019s populist coalition is targeting a deficit of 2.4% of GDP next year, tripling the previous government\u2019s target, as it pledges more spending despite a huge debt pile, which at about 130% of GDP is the biggest in the eurozone behind Greece.<\/span><\/p>\n

Italy\u2019s deputy prime minister, Matteo Salvini, arrives at the G6 interior ministers\u2019 meeting in Lyon, central France.<\/span><\/p>\n

Brussels has rejected the idea of Italy running a larger budget deficit \u2013 the gap between income from taxes and government spending \u2013 than previously planned over the next three years.<\/span><\/p>\n

Rome is due to submit its draft budget by 15 October to the EU commission, the bloc\u2019s executive arm, which will check whether it is in line with EU rules. The government has said it wants to use a spending boost to kickstart investment and consumer spending to fuel growth.<\/span><\/p>\n

The IMF\u2019s chief economist, Maurice Obstfeld, said it was important to maintain the confidence of international money markets, especially when the risks of an escalating trade war and a damaging no-deal Brexit were rising.<\/span><\/p>\n

The IMF deputy director, Gian Maria Milesi-Ferretti, chief economist Maurice Obstfeld and communications officer Wafa Amr answer questions at the World Economic Outlook press conference in Bali.<\/span><\/p>\n

The IMF deputy director, Gian Maria Milesi-Ferretti, chief economist Maurice Obstfeld and communications officer Wafa Amr answer questions at the World Economic Outlook press conference in Bali. Photograph: Stephen Jaffe\/AFP\/Getty Images<\/span><\/p>\n

The IMF\u2019s intervention could prove significant while both sides seek allies in the budget battle as it is considered an important ally by governments as they seek to persuade electorates that debt-fuelled spending could lead to a collapse in confidence and rising borrowing costs.<\/span><\/p>\n

Obstfeld said EU rules that prevented governments adding to already sky-high levels of debt to GDP should be maintained in the current unstable economic climate.<\/span><\/p>\n

Speaking in Bali, he said: \u201cOur concern about Italy is that there is a real imperative for the fiscal policy to maintain the confidence of markets. And we have seen the [government bond yield] spreads increase over the past months. This has certainly contributed to our downgrade of Italian growth and makes the economy more susceptible to shocks.<\/span><\/p>\n

\u201cSo we think it is important that the government operate within the framework of the European rules, which are also important for the stability of the eurozone itself.\u201d<\/span><\/p>\n

Italy\u2019s finance minister, Giovanni Tria, confirmed on Tuesday that the government planned to run a budget deficit of 2.4% of GDP next year but said he wanted to begin \u201cconstructive discussions\u201d with the EU and see a calm \u201ctone\u201d prevail.<\/span><\/p>\n

Addressing Italian lawmakers in Rome, Tria conceded the government had been concerned by investor reaction to Italy\u2019s budget plans, which has resulted in equity markets falling and bond yields rising, signalling an increase in government borrowing costs to the highest levels since 2014.<\/span><\/p>\n

European stock markets staged a partial recovery on Tuesday, with major indices closing higher following a sharp sell-off a day earlier. Italy\u2019s benchmark FTSE MIB closed up 1%, but it was not enough to erase a 2.4% drop on Monday.<\/span><\/p>\n

\u201cAlthough so far there hasn\u2019t been an explosion as some feared, we are of course worried,\u201d Tria said. \u201cAs a responsible government, we aim to explain the budget and thus guide investors in our meetings in order to calm markets.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The International Monetary Fund has thrown its weight behind Brussels in its battle with Italy\u2019s coalition government over plans to increase the indebted country\u2019s borrowing in its next budget. The Washington-based lender of last resort, which is holding its annual conference in Bali this week, warned Rome to abide by the EU\u2019s financial rulebook or risk a rebellion by investors… Read more »<\/a><\/p>\n","protected":false},"author":105,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[96,66,97,8],"class_list":["post-2378","post","type-post","status-publish","format-standard","hentry","category-article","tag-budget","tag-eu","tag-funding","tag-italy"],"_links":{"self":[{"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/posts\/2378","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/users\/105"}],"replies":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/comments?post=2378"}],"version-history":[{"count":1,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/posts\/2378\/revisions"}],"predecessor-version":[{"id":2379,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/posts\/2378\/revisions\/2379"}],"wp:attachment":[{"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/media?parent=2378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/categories?post=2378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/europeandrussiablog\/wp-json\/wp\/v2\/tags?post=2378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}