Italian Politics Monitor - Budget Balancing Act

Published 12/19/2018, 12:10 AM

The Italian government struck an agreement with the European Commission on its 2019 budget, meaning the risk of an excessive deficit procedure is off the table for now.

Changes in the wider European political landscape were a key factor behind the Commission's budget leniency.

The Italian budget truce should be supportive for global risk sentiment and Italian assets, although we think it is difficult to see the 10Y spread between Italy and Germany falling back below 200bp (i.e. pre-election levels).

Although we expect Italian risks to move into the background near term, many fundamental questions remain unresolved, including on the weak economic outlook as well as the durability of the governing coalition.

To read the entire report Please click on the pdf File Below..

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