Italy and EU Clash over New Budget

ItalyEUFlag, cc Flickr Ed Uthman, modified,


Italian co-Deputy Prime Minister Luigi Di Maio got what he wanted when the broad outline of the government was made public last weekend. The budget included the M5S’ ‘citizen’s income,’ a new spending initiative intended to ease the burden of low-income families. The budget also included income tax breaks championed by the League and plans to enable early retirement for hundreds of thousands of workers.

The inclusions carry a high fiscal cost, and Italy upped its budget deficit target for 2019 to 2.4%. The final number will likely come in higher; Rome has undershot its own deficit targets for both 2017 and (likely) 2018 as well.

The new budget has had two immediate impacts: 1) it has sent bond markets into a frenzy; and 2) it has set the stage for a high-profile clash with Brussels.

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