Italy Coalition Seeks Budget Accord in Bid to Reach EU Deal

December 16, 2018 Updated: December 16, 2018

Italy’s squabbling populist coalition partners were to meet on Dec. 16 to seek agreement on key parts of the country’s contentious 2019 budget in a bid to gain European Union approval and avoid sanctions.

Prime Minister Giuseppe Conte was due to meet with Deputy Premiers Luigi Di Maio, Matteo Salvini, and Finance Minister Giovanni Tria to discuss the budget plan and see whether a deal is close enough to be finalized, a spokesman for Conte said.

The distance between Italy and the European Commission has narrowed, but the government has been asked to come up with an additional 3.5 billion euros ($4 billion) of measures to reduce the structural deficit, Corriere della Sera and other Italian dailies reported Dec. 16.

The last negotiations with the EU took place Dec. 14, when there were several hours of useful exchanges on technical details, said an EU official who asked not to be identified. Now Italy’s government needs to discuss the issues and make a decision, the official added.

Salvini, who heads the anti-immigration League, said he’s counting on a positive response from the EU, according to comments reported by Italian news agency Ansa. “We’ve done everything possible. We’ve demonstrated a will to dialogue that no other Italian government has ever shown,” he was quoted as saying in Milan.

Bonds Shift

The drawn out conflict between Italy and EU officials has caused Italian sovereign bond values to plummet, though recent signals that the Italian side was willing to soften its stance have sparked a rally.

Yields on 10-year government debt fell last week to the lowest level since September after Rome proposed to cut the 2019 budget shortfall to 2.04 percent of output, from the previous goal of 2.4 percent that was rejected by the EU. Italy risks fines for violating EU rules on deficits.

Salvini and Five Star leader Di Maio, remain at odds on key issues such as the latter’s proposal for a citizen’s income and incentives to encourage the purchase of low-emission cars, Corriere reported. Salvini, who has strong support from Italy’s industrial north, isn’t a big fan of either measure.

Fiat Chrysler Automobiles NV has said it would reconsider a plan to invest 5 billion euros in Italy if the tax on higher emissions vehicles is approved as part of the budget package.

By Dan Liefgreen & Jerrold Colten

From Bloomberg