SMM News: on Tuesday, it was reported that Italy believes it can meet the EU's requirements for its public finances this year, but the real crux of the negotiations is 2020. The European Union has threatened Italy with disciplinary action, and its fiscal policy will be more closely monitored and could eventually lead to fines.
The European Union complains that the Italian government failed to cut public debt in 2018 as promised, and believes that unless the anti-austerity Italian government takes spending-saving measures, the debt will continue to rise this year and next.
The Italian government now thinks the budget deficit will be 2 per cent of GDP in 2019, a level the European Commission accepted in December, but the EU also wants the country to make a commitment to 2020, according to sources.
Italian political parties want to increase deficit
This forced Italy's economy and finance minister, Tria, to engage in difficult negotiations with the ruling coalition of the anti-establishment five-star movement and the far-right Italian coalition party. The ruling coalition does not want to cut the deficit next year.
Italian political parties are open to discussing the 2019 budget, but do not want the 2020 budget to be constrained. If policy remains the same, the deficit will be 1.8 per cent of GDP next year, according to the finance ministry.
That is below the government's official target of 2.1%, but the ruling party wants to increase the deficit, leaving room for tax cuts to boost the Italian economy. "I would be happy to raise the deficit to close to the 3 per cent limit," Mr Bolger, the coalition's economic policy chief, said on Monday. "
The next step in the budget tussle is expected to take place at a summit on June 20-21, when Italian Prime Minister Conte will try to defend Italy in meetings with outgoing European Commission President Jacques and EU leaders.
EU calls on Italy to abide by Fiscal rules
On Friday, EU Commissioner for Economic and Financial Affairs Moscovici said he would continue to prepare for disciplinary measures against Italian debt and, if possible, the European Commission was ready to avoid disciplinary procedures.
Euro Group President Jean-Claude Centro also said last week that EU member states and the European Commission agreed on Italy. Euro zone ministers have asked Italy to take steps to comply with EU fiscal rules, and the size of the euro zone's common budget will be decided by leaders later this year.
In response, Italian Deputy Prime Minister Salvini believes that the European Union is implementing failed economic rules, and the 2020 budget must cut taxes sharply.
(EURUSD 4-hour chart)
Us $4 hour chart)
Euro is expected to maintain downward risk
Italian 10-year bond yields rose slightly, with Italy's total government bonds rising to 2.37 trillion euros in April. As of 0830 Beijing time, the euro was at 1.1224 against the dollar, up 0.05% in the day.
While the environment should be bad for the dollar this summer, there are enough negatives for the euro, such as ECB easing, Italy and Brexit, ING said in its report. It will prevent the euro from breaking the 1.10-1.15 range against the dollar this year.
Technically, the EURUSD still faces downside risks and is now stable around 1.12. The 4-hour chart rate is between 61.8% and 50%, with strong support at 1.12. Technical indicators have rebounded from lows but remain in negative territory, maintaining downside risk.
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