Posts Tagged ‘Luigi Di Maio’

Berlin treads softly-softly on Macron over deficit (Italy is happy!!)

December 12, 2018

Germany is taking a softly-softly approach to French President Emmanuel Macron’s use of government largesse to calm violent “yellow vest” protests, government sources say, as Berlin puts European stability above fiscal discipline.

A reluctance to criticise publicly contrasts with complaints about France from Italy whose populist coalition government is in a stand-off with Brussels over its own big-spending budget which includes a sharp spike in the deficit.

“It’s good news that things are calming down. France is Germany’s most important partner and we have no interest in seeing it destabilised for the long term,” a senior German government source said.

Ministers have been urged not to stoke confrontation with Paris as Macron attempts to end mass demonstrations against his pro-business reforms, promising tax and spending measures for the lowest earners worth billions of euros (dollars).

Germany is taking a softly-softly approach to French President Emmanuel Macron's easing of the budget strings to cope with protests, with Chancellor Angela Merkel (right) focussing on stability in Europe, analysts say

Germany is taking a softly-softly approach to French President Emmanuel Macron’s easing of the budget strings to cope with protests, with Chancellor Angela Merkel (right) focussing on stability in Europe, analysts say Germany is taking a softly-softly approach to French President Emmanuel Macron’s easing of the budget strings to cope with protests, with Chancellor Angela Merkel (right) focussing on stability in Europe, analysts say POOL/AFP

“We don’t know how they’re going to pay for all this,” the government source said, but “we will hold back from talking about a budget slip. This is about the French public finances; it’s not for Germany to judge.”

– Damping down fires –

Especially since the financial crisis of 2008, Germany under Chancellor Angela Merkel has prioritised tight budgets, with deficits held to well under the EU three percent of GDP limit.

Her governments have also slashed accumulated total debt, bringing it down towards the EU ceiling of 60 percent of GDP.

They have not been shy of passing judgement on less stringent fellow EU members — such as Italy — and have opposed reforms to the 19-nation euro single currency that could mean more risk sharing between capitals.

But for now Berlin’s larger concern is a political crisis across Europe that has been stoked by populist victories, including Britons’ 2016 vote to quit the European Union.

Italy, too, has been largely spared a wagging Teutonic finger this year despite its deficit-busting budget which the EU, in a first, rejected outright, insisting that Rome try again.

“We see it in France, we see it in other countries, we have an urgent responsibility to halt these populist movements in the European elections” next May, another government source said.

The tone from the European Commission has meanwhile been notably calm and understanding — unlike for Rome, as the Italian government has pointed out.

Overstepping the budget limit “can be envisaged in a limited, temporary and exceptional way,” Economic Affairs Commissioner Pierre Moscovici told France’s Le Parisien daily Wednesday.

Italy’s Deputy Prime Minister Luigi Di Maio noted that a higher deficit “will create a French problem, after the Italian problem, if the rules are the same for everyone.”

“I expect the Commission to open a procedure” that could lead to sanctions for excessive spending — as it has threatened to do in Italy’s case, he added.

Despite their public forbearance, German leaders are in private frustrated with Macron’s uphill struggle to push through reforms they see as indispensable.

One senior official noted how the young president’s at times arrogant style has alienated parts of the French public.

And any weakening of restraint in French spending policy undermines Macron’s bet he could win German confidence by showing France could live within its means and reshape state finances.

– ‘More Renzi than Schroeder’ –

German economists greeted sceptically Macron’s emergency concessions to the “yellow vests” after repeated weekends of marches, barricades and violence around France.

For example, an increase in the minimum wage “will not reduce social tensions in France, where the minimum wage is already so high that it hampers the employment of weaker groups in the labour market, especially young people,” said Clemens Fuest, head of Munich’s influential Ifo think-tank.

German newspapers, which last week celebrated the 50th anniversary of irrepressible Gaulish comic book hero Asterix appearing in the language, see a similar stubbornness in modern France’s resistance to its young president.

For conservative Die Welt daily, Macron is “more of a Matteo Renzi”, whose recent premiership in Italy failed to secure much-needed reforms, than a Gerhard Schroeder — the chancellor whose policies are credited with reviving Germany’s fortunes after the moribund early 2000s.

AFP

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Italian government says its budget will prevent ‘scenes like we’ve seen in Paris — Macron’s money give away will put France in EU doghouse on spending with Italy

December 12, 2018

Fiscal restrained in the EU may be dead.

Italian government says its budget will prevent 'scenes like we've seen in Paris'
Italian Prime Minister Giuseppe Conte (C) with his deputies Luigi Di Maio (L) and Matteo Salvini (R). Photo: Filippo Monteforte/AFP
France’s “yellow vest” protests have given the Italian government new ammunition in their budget battle with Brussels, as ministers say higher public spending is needed to prevent social unrest.

Italian Deputy Prime Minister Luigi Di Maio said on Tuesday that “there will be a French problem” on top of an Italian one if France’s deficit breaches EU rules after Emmanuel Macron unveiled measures to quell protests.

“France will have to increase its deficit and there will be a problem for France, if the rules are the same for everyone,” said Di Maio, whose own government’s big-spending budget is facing EU disciplinary measures.

And speaking at his rally in Rome on Saturday, Co-Deputy Prime Minister Matteo Salvini said the Italian government was taking a “very different path” to Paris.

“Do people in Italy want scenes like we’ve seen in Paris? … No. I want to prevent this,” he said.

‘Yellow vest’ protesters in Paris. Photo: AFP

France’s “yellow vest” protesters  have taken aim at French President Emmanuel Macron’s liberal economic policies, and have so far forced the French government to pay for an increase in the minimum wage – a potentially costly measure – as well as cancel a planned rise in taxes on petrol and diesel.

Italian ministers seized on the anti-government demonstrations rocking Paris as further justification for their ‘people’s budget’, which proposes to increase public spending in defiance of austerity measures being followed across Europe – including Italy, for now.

Italy’s budget for 2019 was the first in history to be rejected by Brussels for breaking spending rules, and the populist government of Di Maio’s Five Star Movement and Matteo Salvini’s far-right League is now trying to come up with another draft.

Brussels has insisted it will sanction Italy if its budget is not adjusted to meet European Union spending rules, focusing on the proposed deficit level of 2.4 percent.

READ ALSO: Budget of change’: Italy announces plans to end austerity

Italian Prime Minister Giuseppe Conte, travelling to Brussels this week, is expected to argue that his government’s budget goes beyond numbers and is the only defence against the unrest and social revolt taking place across Europe, La Stampa writes.

The country “can’t concentrate only on financial stability, we also need to look at social stability,” the premier was cited as saying. “The austerity-oriented recipes of the past few years have failed.”

The EU rules on public spending are “binding for everybody, that is clear,” said senior German MEP Manfred Weber, when asked by reporters about France’s new expenditure.

But he added that “what we should not do as the European Union is intervene in domestic policies.”

READ ALSO: EU slams Italy’s ‘unprecedented’ breaking of budget rules

https://www.thelocal.it/20181211/italian-government-says-its-budget-will-prevent-scenes-like-paris-protests

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See also:

Macron, Facing Protests, Departs From EU Fiscal Strictures

https://www.wsj.com/articles/macron-facing-protests-departs-from-eu-fiscal-strictures-11544557683?mod=hp_lista_pos1

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Bloomberg

French President Emmanuel Macron has emboldened Italy’s populists in their standoff with the European Union by embarking on a spending spree of his own.

The promises Macron unveiled Monday night in a bid to defuse the Yellow Vest protests, from a 100-euro ($114) a month hike in the minimum wage to abolishing a tax on pensions, could play into the hands of Italian Deputy Premiers Matteo Salvini and Luigi Di Maio as they challenge EU budget rules to start delivering on election promises.

Yellow vest protestors watch as Emmanuel Macron speaks on television on Dec. 10.

Photographer: Guillaume Souvant/AFP via Getty Images

France’s budget deficit could defy the very same rules. As the EU pressures Italy to retreat from a deficit of 2.4 percent of GDP next year, Macron’s plan could push France’s to 3.5 percent, according to initial estimates.

French bonds fell for a fourth straight day Tuesday, with the 10-year yield spread over Germany reaching 46 basis points, the most since Macron was elected in May last year.

Read More: Macron’s Plan Raises Prospect of Downgrade for French Bonds

While investors are starting to look more closely at French spending, Italy has periodically complained that Paris gets special treatment when the EU Commission is assessing budgets.

“Macron’s spending will encourage Salvini and Di Maio,” said Giovanni Orsina, head of the School of Government at Rome’s Luiss-Guido Carli University. “Macron was supposed to be the spearhead of pro-European forces, if he himself is forced to challenge EU rules, Salvini and Di Maio will jump on that to push their contention that those rules are wrong.”

What Our Economists Say…

“The fiscal loosening shows that France’s embattled president is more worried about yellow vests in Paris than gray suits in Brussels, whose fiscal rules are being broken. The danger is that the protests continue anyway because too much of the giveaway is targeted on pensioners and not enough on those in work.”

–Maeva Cousin, Bloomberg Economics

Salvini and Di Maio, euroskeptics who’ve both expressed solidarity with France’s grassroots demonstrators, are already resisting pressure from Premier Giuseppe Conte and Finance Minister Giovanni Tria to yield ground to the European Commission, the EU’s executive arm, over the deficit target for next year. The two deputy prime ministers largely set the agenda for the coalition government since they control its parliamentary majority.

Read More: France Defends Spending Push That Puts EU Deficit Limit at Risk

Conte will meet commission head Jean-Claude Juncker in Brussels for another round of budget talks on Wednesday afternoon, ahead of a summit of European leaders on the two following days. Salvini and Di Maio are refusing to cut the deficit to below 2.2 percent, newspaper La Stampa reported.

Conte and Tria have been pushing for a deficit target at about 2 percent, with both eager to keep Italy in good standing with the EU, according to government officials who asked not to be named discussing confidential talks. The commission could fine Italy if budget demands are not met.

EU officials said Tuesday that they won’t take a view on Macron’s budget plans until they’ve had a chance to study them in detail.

Salvini of the anti-migration League and Di Maio of the anti-establishment Five Star Movement had signaled readiness to compromise in recent weeks but they have yet to agree to either dilute or delay their landmark election pledges — a citizen’s income for the poor for Five Star, and a lower retirement age as well as tax cuts for the League.

Read More: How Yellow Vest Protests Came to Pose a Threat to Macron

Di Maio, whose party has its electoral base in the poorer south of Italy, has been the most vocal in his support for the Yellow Vest protesters. Di Maio said Monday he hopes their demands “can be channeled into a democratic solution which manages to send home the establishment which is damaging the rights of the weakest in society.”

The French protests also give Conte and his deputies added clout in negotiations with Brussels, which is wary of fueling anti-EU sentiment ahead of European Parliament elections in May. Salvini and Di Maio are already portraying that vote as a battle between national sovereignty and interfering “Eurocrats.”

The populists are considering a campaign for May that would accuse the EU budget enforcers of discriminating against Italy, Corriere della Sera reported.

Cabinet undersecretary Giancarlo Giorgetti, a close adviser to Salvini, called Italy’s budget approach “reasonable,” in comments to reporters cited by Ansa news agency Tuesday. “France has several times breached the 3 percent deficit, Italy hasn’t done it,” he said.

“Conte, Salvini and Di Maio can tell the commission that if there’s been no chaos in Italy, it’s because we’re in power,” Orsina said. “They can say, ‘we’re not crazies acting on a whim, we were asked to do these reforms by the voters.’”

https://www.bloomberg.com/news/articles/2018-12-11/macron-hands-eu-a-new-headache-in-fight-over-italian-budget

 

Italy budget: Rome vows to stick to plans, despite EU concerns

November 27, 2018

 

Italy’s government says it will stick to its high-spending budget plans, setting up a potential stand-off with the European Union over its deficit.

PM Giuseppe Conte, who held talks with deputies Matteo Salvini and Luigi Di Maio on Monday, said the objectives for 2019 had already been fixed.

However, Mr Di Maio hinted earlier that the government might be willing to cut the deficit target a little.

The European Commission has threatened fines unless Italy revises its plans.

The Italian government has vowed to “end poverty”, trebling the previous government’s planned budget deficit.

Italian prime minister Giuseppe Conte turns to camera, smiling, as he is led away by President of the European commission Jean Claude Juncker

Best of friends? Italian PM Giuseppe Conte discussed the budget standoff with the head of the European Commission. AFP

Italian media were on Monday morning reporting that the deficit could be slashed from a planned 2.4% to 2.2% of GDP – but government sources quoted by Reuters suggested the deficit could be reduced to as low as 2%.

Deputy Prime Minister Luigi Di Maio suggested the government might be willing to reduce the deficit target to end the stand-off with the EU saying: “If, during the negotiating process, the deficit has to be reduced a bit, that’s not a big deal.”

But in a joint statement later on Monday, the three men appeared to take a tougher line, saying: “The objectives that have already been fixed are confirmed.”

Italy’s draft budget contains expensive measures for introducing a guaranteed basic monthly income of about €780 (£700) for poor families, and scrapping extensions to the retirement age.

Monday’s statements followed a weekend meeting in Brussels between Mr Conte and European Commission President Jean-Claude Juncker.

It was not clear how any reduction in spending would be financed if key election promises made by the ruling populist League and Five Star parties remained untouched. Nor was it certain that the changes would be enough to satisfy the European Commission.

‘Sleepwalking into instability’

The Commission announced last Wednesday that Italy was “sleepwalking into instability” and that opening a case under the eurozone’s “excessive deficit procedure” was now on the cards.

Fines under that procedure could start at 0.2% of Italy’s entire GDP – which would measure in the billions of euros.

The reason for Europe’s concern is that while Italy is the third-largest economy in the eurozone, with a GDP of more than two trillion euro, it also has a large amount of debt.

Eurozone rules say that countries should both keep their deficit to less than 3% of GDP – which Italy’s plans do – but also keep national debt to 60% of GDP or less.

Many countries exceed that debt limit without any action being taken. But at almost 132% of GDP, Italy has the second highest rate in the bloc.

When Brussels received Italy’s draft budget, it said the country’s refusal to deal with its debt and essentially triple the planned deficit was unacceptable.

Italy, meanwhile, maintained that investment was needed to kick-start the sluggish Italian economy and reduce the suffering of its citizens.

BBC News

https://www.bbc.com/news/world-europe-46343033

Di Maio says EU election will shake up politics, help Italy

November 18, 2018

European parliamentary elections in May will shake up the political landscape and help Italy in its budget battles with Brussels, Deputy Prime Minister Luigi Di Maio said on Sunday.

The European Commission last month rejected Italy’s 2019 budget, saying it flouted a commitment to lower the deficit and did not guarantee a reduction in the debt, the second highest in the euro zone as a proportion of GDP.

Italy’s coalition, comprising the anti-establishment 5-Star-Movement and far-right League, has refused to change the main points of the budget, saying it will boost the economy via tax cuts, a lower retirement age and higher welfare spending.

Di Maio told Corriere della Sera daily he was confident that Rome and Brussels could avoid a collision, predicting that the Commission would take a different approach after May’s elections which might boost anti-austerity parties.

Image result for Luigi Di Maio, pictures

Luigi Di Maio and Matteo Salvini

“…citizens will vote in the European elections and will cause a big shake up,” said Di Maio, who is also leader of the 5-Star. “We are ready to discuss things around a table, but they cannot ask us to massacre Italians.”

Di Maio reiterated that the government was willing to sell real estate assets, reduce waste and introduce safeguard clauses to ensure the deficit will not exceed the target of 2.4 percent of output in 2019. But he said: “The main reforms of the budget must remain in place”.

The European Commission is expected to start disciplinary steps against Rome next Wednesday, a procedure which could eventually end in unprecedented fines for Italy.

The European elections are shaping up to be a battle between centrist, pro-EU parties and nationalist far-right formations that want to stop immigration.

Reporting by Giselda Vagnoni; Editing by Janet Lawrence

Reuters

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Italy defies EU’s request for smaller budget

November 14, 2018

Italy has stuck to its big-spending budget plan, despite demands for changes from the EU and the threat of financial penalties. The move has sparked concerns over Italy’s debt, and uncertainty from investors.

The Italian government vowed to stand firm on its 2019 draft budget on Tuesday, ignoring a deadline set by the European Commission to revise its plans.

Italy set to defy EU as budget deadline looms
Prime Minister Giuseppe Conte (C) with his deputies Luigi Di Maio (L) and Matteo Salvini (R). Photo: Filippo Monteforte/AFP

Although Italy did make minor adjustments, the revisions are not likely to persuade the Commission, putting Italy in a high-stakes standoff with Brussels that could result in financial sanctions.

Arm wrestling between Italy and the EU

  • Shortly before the midnight deadline, Italy’s Deputy Prime Minister Luigi Di Maio announced that the government would not change its ambitious social spending plan, arguing that the increased spending is necessary to promote growth after years of austerity.
  • Italy’s draft budget will raise the budget deficit to 2.4 percent of gross domestic product (GDP) — a stark increase compared to the previous government’s target of 0.8 percent
  • The European Commission’s forecast, on the other hand, expected a higher budget deficit which would breach the EU’s 3.0 percent limit by 2020.
  • Italy now runs the risk of being fined up to 0.2 percent of GDP — which would amount to about €35 billion ($39.5 billion).
  • The Italian government did make some adjustments, saying that it plans to sell some government real estate to raise cash. Di Maio did not detail what would be sold, but said the properties won’t include “the family jewels.”

‘The budget will not change’

Deputy Prime Minister Di Maio, who leads the populist 5-Star Movement, announced the move in Rome on Tuesday evening following a ministerial meeting.

“The budget will not change, neither in its balance sheet nor in its growth forecast. We have the conviction that this is the budget needed for the country to get going again,” Di Maio said on Tuesday evening after a ministerial meeting.

Speaking at the European Parliament on Tuesday, German Chancellor Angela Merkel said the EU wanted to reach out to Italy, but that the eurozone will only work “if every individual member fulfills their responsibility for sustainable finances.”

Why is a higher deficit in Italy a problem? A rising budget deficit inflates a country’s public debt. As it stands, Italy has one of the highest debt-to-GDP ratios in the EU — 130 percent of GDP, second only to Greece. Within the Eurozone, the recommended debt-to-GDP ratio is 60 percent. Rising levels of public debt would threaten Italy’s credibility in global markets and, according to economists, be a hindrance to growth.

Why does Italy’s government want to increase spending? The country’s coalition government, formed through an alliance between the populist 5-Star Movement and the far-right League, believes increased spending is the only way to jump-start the country’s economic growth. The government’s plan to increase spending is aimed at implementing a series of electoral promises, including lower taxes, a lowering of the retirement age, and a universal income.

What happens next: If EU officials reject the budget again, the Commission can trigger legal action under an excessive deficit procedure. EU member states would then have to approve the Commission’s proposal and Italy would be given another deadline to make the necessary amendments. If Italy still refuses to comply, the Commission can then apply fines up to 0.2 percent of GDP or cut EU regional subsidies.

rs, gs/ (AFP, dpa, Reuters)

https://www.dw.com/en/italy-defies-eus-request-for-smaller-budget/a-46276129

Italy to defy EU over big-spend budget

November 13, 2018

Italy’s populist government was set Tuesday to defy the European Commission, preferring to risk financial sanctions than revise its big-spending budget.

The coalition had been given time to change its 2019 plans but insists an anti-austerity approach will help kickstart growth in the eurozone’s third largest economy, and consequently reduce the public debt and deficit.

© AFP | (From left) Italy Prime Minister Giuseppe Conte, Deputy Premiers Luigi Di Maio and Matteo Salvini are expected to defy Brussels and refuse to rein-in their big-spending budget which the EU says will only increase the country’s already massive debt mountain

The far-right League and Five Star Movement (M5S) plan to run a public deficit of 2.4 percent of GDP in 2019 — three times the target of the government’s centre-left predecessor — and 2.1 percent in 2020.

But Brussels forecasts Italy’s deficit will reach 2.9 percent of its Gross Domestic Product in 2019 and hit 3.1 percent in 2020 — breaching the EU’s 3.0 percent budget limit.

League head Matteo Salvini vowed Monday to put his back into “defending the budget, as if it were a rugby scrum”.

The European Commission rejected Rome’s budget outright last month — a first in the history of the European Union.

It gave Italy until Tuesday to make changes and warned non-compliance could activate the “excessive deficit procedure” (EDP), a complicated process that could lead to fines and also risks provoking a strong, adverse market reaction.

While Rome targets economic growth at 1.5 percent next year, Brussels has forecast a more cautious 1.2 percent, putting Italy at the bottom of the table.

– ‘Suicide’ –

Italy’s Economy Minister Giovanni Tria has accused Brussels of getting its sums wrong.

It would be “suicide” to attempt to reduce the deficit to the previous goal of 0.8 percent of GDP, he has said, insisting “we must get out of the trap of weak growth”.

The elephant in the room is Italy’s public debt, which comes in at a whopping 2.3 trillion euros ($2.6 trillion), a sum equivalent to 131 percent of its GDP — second in the euro area only to Greece and way above the 60 percent EU ceiling.

Prime Minister Giuseppe Conte has attempted to soothe troubled markets by saying the Commission’s forecasts “undervalue the positive impact of the budget and structural reforms”.

“The deficit will decrease with growth, and this will reduce the debt to GDP ratio to 130 percent next year and… 126.7 percent in 2021”, he said.

The fine for refusing to review the budget could correspond to 0.2 percent of Italy’s GDP — some 3.4 billion euros.

European Economics Commissioner Pierre Moscovici has said he hopes a compromise can be found to avoid sanctions.

“If you ask us to tackle waste, to find more resources, we can talk about that,” M5S head and deputy prime minister Luigi di Maio said on Sunday.

But he added: “If you ask us to massacre the Italians, we say no: the budget will not change”.

Fellow deputy PM Salvini, who insists the Commission mind its own business, has called for a rally in the capital next month to tell “the gentlemen of Brussels: ‘let us work, live and breathe'”.

– ‘First step’ –

The European Commission “will make the first step to move Italy into EDP” after an update on the debt expected on November 21, said Lorenzo Codogno, former chief economist at the Italian Treasury Department.

The country will likely be given three to six months to prepare correction plans, after which nothing will happen until the new Commission takes up office at the end of next year following European Parliament elections, he said.

“The true guardians of fiscal discipline will be, as usual, financial markets,” he said.

All eyes are on the “spread” — the difference between yields on 10-year Italian government debt compared to those in Germany — which has more than doubled since May, when negotiations to form the coalition government in Rome began.

Uneasy investors, who demand a higher return to put their money into Italian assets, have already cost the taxpayer an additional 1.5 billion euros in interest over the past six months, according to the Bank of Italy.

The fear is that stress in Italy could spread to other European countries which are only just recovering from the eurozone debt crisis.

AFP

Italy Senate passes government’s anti-migrant decree

November 7, 2018

The Italian Senate on Wednesday cleared the way for far-right leader Matteo Salvini’s tough anti-migrant and security decree to become law following a confidence vote.

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The populist government of Salvini’s League and Luigi Di Maio’s anti-establishment Five Star Movement (M5S) won the vote with 163 senators for, 59 against and 19 abstentions, including five M5S members opposed to the stringent decree.

The new laws could allow migrants to be removed from the country, even those already living there Matteo Salvini and Luigi Di Maio. (File/AFP)

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The lower house of parliament now has until the end of November to approve the decree, which the coalition first put forward in September and makes it easier to expel migrants and strip them of Italian citizenship.

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“Salvini decree, a historic day,” Salvini tweeted after the Senate vote.

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The government opted for a confidence vote to get the decree through the senate after M5S members tabled a slew of amendments. It should have no problem passing the lower house given the coalition’s majority.

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The decree seeks to radically reduce the number of migrants receiving “humanitarian protection” — a lower level of asylum status that is based on Italian rather than international law — that was awarded to 25 percent of asylum seekers last year.

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It will now be awarded based on six strict criteria, including whether there is an urgent medical need or if the applicant was the victim of a natural disaster, or if they had carried out “heroic acts” in Italy.

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Of the 81,500 decisions handed down by Italian authorities in 2017, eight percent were granted asylum, eight percent subsidiary protection and a quarter humanitarian protection.

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The remainder were rejected. If appeals fail, they face the prospect of being classed as economic migrants who must return home.

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Those seeking refugee status will also now have their requests suspended if they are considered “socially dangerous or convicted in the first instance” of crimes, while their appeals are ongoing.

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They will in future be housed in bigger reception centers, while only minors and those with recognized refugee status will be housed in different parts of the country in order to facilitate integration.

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There are currently around 146,000 migrants held in reception centers, down from 183,000 at the end of 2017.

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The Italian mayors’ association has railed against the change, saying that having hundreds of unemployed migrants in reception centers can have a negative impact on small communities.

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The new law also lets local police have Taser stun guns and makes it easier to evict squatters by getting rid of the obligation of finding provisional housing for the most vulnerable.

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One of the most controversial measures in the bill provides for stripping immigrants of their Italian nationality if they are convicted of “terrorism.”

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Salvini, who is also deputy prime minister, has taken a hard-line on immigration since the coalition came to power in June, refusing to allow several ships carrying migrants rescued in the Mediterranean to dock at Italian ports.

http://www.arabnews.com/node/1400846/world

S&P downgrades Italy debt outlook, intensifying budget stand-off

October 27, 2018

Ratings agency S&P has downgraded its outlook for Italy’s sovereign debt but left its credit rating untouched, upping the pressure on Rome amid a stand-off with Brussels over its budget.

Friday’s announcement, which warned Rome’s fiscal policy was jeopardising banks’ ability to fund the Italian economy, followed last week’s decision by Moody’s to cut Italy’s credit rating to a notch above junk status.

“The negative outlook reflects the risk that the government’s decision to further increase public borrowing — besides exacerbating Italy’s already weak budgetary position — will stifle the incipient recovery of the private sector,” S&P said.

The decision indicates the debt grade could be cut in the coming months.

The far-right League and anti-establishment Five Star Movement, ruling in coalition, have refused to curb their big-spending programme which forecasts a public deficit of 2.4 percent of GDP in 2019.

The former centre-left government had pledged to keep next year’s deficit to 0.8 percent of GDP in a bid to ease Italy’s vast public debt, which amounts to a phenomenal 2.3 trillion euros.

Brussels on Tuesday rejected the new plan outright, accusing Rome of “openly and consciously going against commitments made” and requesting a revision.

But the ratings decision was met with a renewed refusal to budge by League head Matteo Salvini and Five Star chief Luigi Di Maio.

Image result for Luigi Di Maio, photos

“Are ratings agencies unaware of the global financial crisis?” Salvini said on Friday, while Di Maio said such organisations “do not measure the wellbeing of a country’s citizens”.

“We will continue! Change is underway,” added Di Maio.

– ‘No confidence’ –

The Moody’s downgrade, cutting Italy’s debt grade to Baa3 from Baa2 — while setting the outlook at “stable” — came as international financial watchdogs sounded the alarm over Italy’s economic choices.

“By proposing a budget heavy on debt-fuelled spending, the country started clashes both with the European Commission and with the market,” said Fidelity International analysts Andrea Iannelli and Alberto Chiandetti.

“Neither has confidence in Italy’s projection that its economy will grow at a rate of 1.5 percent or that its current debt path is politically and financially sustainable.”

S&P said it could change its outlook to stable if the recovery takes hold and the debt burden stabilises.

Since mid-May, when negotiations to form the coalition in Rome began, Milan’s stock exchange has lost more than 20 percent. The FTSE MIB closed down another 0.7 percent on Friday.

The closely watched “spread” — or difference between yields on 10-year Italian government debt compared to those in fiscally conservative Germany — has more than doubled, widening from 150 points to 309 points.

The Italian banking sector, which holds 372 billion euros worth of the country’s sovereign debt according to the central bank, has been the hardest hit, losing 36 percent on the Milan stock exchange.

– ‘A shared solution’ –

Rome has until November 13 to present a revised budget to Brussels and faces a heavy fine if it fails to do so.

European Central Bank chief Mario Draghi said Thursday he was confident an agreement could be reached.

In the meantime, the commission insists it wants to avoid all-out war with the populists.

“It’s very important for the channels of communication to remain open… and I’m not going to be the one to close them,” Economic Affairs Commissioner Pierre Moscovici told AFP on Wednesday.

“We need to find a shared solution because Italy is a country at the heart of the eurozone” and “I can’t see an Italy without Europe”, he said.

But Salvini insisted this week that the Italian economy is healthy and the new budget “will make it even stronger and will create jobs”.

“We open the little letters from Brussels because we have been brought up well. We read them, we reply to them but we won’t change a comma of the finance law,” he said.

In a briefing to reporters on Friday, an EU official speaking on condition of anonymity said Italy could be the next country to call on the European Stability Mechanism — which since 2008 has bailed troubled economies such as Greece, Portugal and Spain.

“It’s hypothetical for now but that’s reality,” he said.

burs-dg/hs/kaf/sls

AFP

Salvini’s budget fight with Brussels rattles investors — “He cares about the consolidation of his power and the League”

October 11, 2018

 

Those who took League leader’s market-friendly language at face value left feeling burnt

Image result for Matteo Salvini, photos

© Bloomberg

By Miles Johnson in Rome

Last month, days before Italy’s populist coalition government was due to announce its spending plans, prime minister Giuseppe Conte met in New York with Larry Fink, head of BlackRock, one of the world’s largest investment groups.

In the same month, Scott Thiel, a senior investor at the company, said he had become so convinced that Rome would embrace a “market-friendly outcome” for its budget that he had started snapping up Italian debt.

Some international investors had become increasingly confident that Matteo Salvini, leader of Italy’s hard-right League party and the dominant figure in the government, was not the unpredictable anti-European populist some had feared.

Now, many will be worried they made an error of judgment.“He is focused on an end goal,” said Francesco Galietti, a risk consultant in Rome. “If he is forced to choose between being market-friendly, and politics, he will prioritise his political interests”.

Mr Salvini had increasingly started to sound like a pragmatist who could be trusted to control his anti-establishment Five Star coalition partner. At a summit on the shores of Italy’s Lake Como in September, he had given a masterclass in telling an audience of business leaders and investors exactly what they wanted to hear. “Every morning, before I call my kids, I check the [Italian bond] spread,” he said.

This week, investors watched in dismay as Mr Salvini, next to Marine Le Pen at a joint press conference in Rome, launched a tirade against “Soros-esque” speculators after the European Commission warned the Italian government that its budget plans for next year will break eurozone spending rules. With Italy’s borrowing costs shooting up to the highest level in four years since the budget plans were announced, anyone who had bought its debt will be nursing losses.

Mr Thiel and BlackRock declined to comment.Mr Salvini launched another broadside against financial markets on Wednesday. “Should I change my policies — my agreement with Italians — on the basis of what some speculators decide in morning? No,” he said in an interview on Italian television.

“If someone speculates to try and make us turn back he is wrong, and he will lose.”

As Mr Salvini ramps up this rhetoric, investors fear the government is not only willing to risk a head-on collision with Brussels over its budget plans, but will also dare to stare down financial markets.“It seems to us that [Five Star leader] Luigi Di Maio and Matteo Salvini are prepared to play hardball, and the disruption could help them gain power in the next EU parliament election,” said Kaspar Hense, a portfolio manager at BlueBay Asset Management.”

Mr Salvini has set his sights on achieving a big result in next year’s European elections and has been emboldened by polls showing the League has overtaken Five Star as Italy’s most popular party. “Salvini is an extremely rational actor, he is not a mad dog,” said Mr Galietti.

“He cares about the consolidation of his power, and increasing the power of the League.”

The question remains, at what point financial markets could force Mr Salvini to change course. Mr Salvini said on Wednesday that the spread at which Italian 10-year government bonds traded over their German equivalent would never rise to above 400 basis points, effectively setting a target for markets to test.

“Our economy is healthy,” he said. “I would not do a budget that steals the future from my children.”What Mr Salvini or the coalition could do, aside from reverse course on their budget plans, to calm the markets, is also unclear.

Giovanni Tria, the coalition’s technocrat economy minister, has called for a calmer tone in discussions with Brussels over the budget plans, but this week confirmed to Italian lawmakers that Rome would stick to its ambitious targets for growth and spending.

The League leader has also suggested that Italian borrowers could step in to buy the country’s debt if international investors would not — possibly a sign that Mr Salvini believes Italy, which has the second largest debt-to-GDP ratio in Europe, may not need to rely on outside investors at all.

“The Italians are ready to help us. Nobody thinks that we will end up like Greece, absolutely not,” he said this week. Having been burnt once by his reassurances, observers must now decide if this time they should take Mr Salvini at his word.

https://www.ft.com/content/13a885a4-cc7c-11e8-b276-b9069bde0956

Italy digs in over budget plan as pressure rises — investors shift en masse out of Italian sovereign debt

October 10, 2018

Italy’s government said on Wednesday it would not backtrack on plans to increase deficit spending, digging in against financial market and EU pressure, and brushing off criticism from parliament’s budgetary office.

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The office on Tuesday refused to validate the multi-year budget plan, which has prompted nervous investors to shift en masse out of Italian sovereign debt, saying the forecasts for economic growth were too optimistic.

But Economy Minister Giovanni Tria, struggling to impose his views as a moderating influence on fiscal matters within the cabinet, said the government considered it appropriate to confirm those forecasts.

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Economy Minister Giovanni Tria

“The rise of yields on state bonds recorded in the past few days is certainly worrying, but I want to repeat that it’s an excessive reaction that isn’t justified by Italy’s economic fundamentals,” said Tria, addressing parliament for a second straight day.

He said deficit spending would be worth 22 billion euros next year with the budget including 15 billion euros ($17.2 billion) in cuts and extra revenue, to cover 37 billion in total additional spending outlined in the plan.

The government, which took office in June, has fixed next year’s deficit at 2.4 percent of gross domestic product (GDP), three times the forecast of the previous center-left administration.

Economic growth is seen at 1.5 percent next year, 1.6 percent in 2020, and 1.4 percent in 2021. The parliamentary budget office opinion is not binding, but its rejection of the growth forecasts forced Tria to return to parliament to explain.

The budget outline has roiled markets above all concerned about the sustainability of Italy’s huge debt.

But bond yields declined slightly on Wednesday after Tria – who is not a member of either of the two parties in the ruling coalition – also said he wanted to collaborate with the “authorities involved” over the budget plan.

Earlier, a leading lawmaker’s mention of a possible credit rating downgrade for Italy had sent yields higher.

On Wednesday, the leaders of both coalition parties repeated that they would not give in to pressure.

On RAI state radio, anti-establishment 5-Star Movement leader Luigi Di Maio said he would not “betray” Italians by changing the budget plan.

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Luigi Di Maio

Far-right League leader Matteo Salvini, speaking on RAI state TV, warned “speculators” against betting that the government would climb down.

Salvini said “a few big financial institutions” are “betting that Italy will backtrack (on the budget). They’re wrong”.

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Matteo Salvini

Additional reporting by Giselda Vagnoni, Giulia Segreti, Angelo Amante, and Stefano Bernavei editing by Giselda Vagnoni and John Stonestreet

Reuters