Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Italian party to ask constitutional court to rule against govt deficit hike

Published 10/11/2023, 10:39 AM
Updated 10/11/2023, 10:41 AM
© Reuters. FILE PHOTO: Italia Viva party leader Matteo Renzi speaks at the upper house of parliament ahead of a confidence vote for the government, in Rome, Italy, July 14, 2022. REUTERS/Guglielmo Mangiapane/File Photo

ROME (Reuters) - An Italian centrist opposition party led by former Prime Minister Matteo Renzi said on Wednesday it would appeal to the constitutional court to rule unlawful the government's decision to raise the 2024 budget deficit.

The Treasury's fiscal framework presented last month hiked next year's deficit goal to 4.3% of gross domestic product (GDP) from a previous 3.7%, and targeted its return below the European Union's 3% ceiling only in 2026, with virtually no debt reduction over the same period.

Luigi Marattin, an economist and lawmaker with Renzi's Italia Viva party, told parliament the plan flouted the constitutional requirement that Italy run a balanced budget unless there are exceptional circumstances.

Marattin highlighted that Giorgia Meloni's government was widening the deficit even though it forecast gross domestic product (GDP) growth would be relatively firm by Italy's standards and above the country's so-called "potential" growth rate.

The move was therefore against the law, he said.

The estimate of potential GDP impacts countries' structural budget balances, an indicator that played a fundamental role in assessing member states' compliance with European Union budget rules before they were frozen due to the COVID-19 pandemic.

The EU's fiscal rulebook is due to return next year with changes currently being negotiated by governments, and Italy is proposing ways to make it as lenient as possible.

The Treasury justified the deficit hike with the need to help lower and middle earners and support the economy in the face of international headwinds.

Replying to Marattin, Economy Minister Giancarlo Giorgetti said on Wednesday the government's policy was appropriate given the economic hit from the Ukraine conflict.

"The government did things responsibly and seriously," the minister told reporters.

© Reuters. FILE PHOTO: Italia Viva party leader Matteo Renzi speaks at the upper house of parliament ahead of a confidence vote for the government, in Rome, Italy, July 14, 2022. REUTERS/Guglielmo Mangiapane/File Photo

Italy's plan was poorly received by markets, with the closely-watched gap between the yields on Italian 10-year BTP bonds and equivalent German Bunds exceeding 208 basis points this week, the widest since January, before retracing to 195 on Wednesday.

The Bank of Italy and the International Monetary Fund have both urged Rome to be more ambitious in its debt reduction targets.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.