Italy deficit reports lift Wall Street, Euro stocks

Wall Street and European stock markets joined the euro in staging a mild recovery yesterday after Italy indicated it would look to ease a budget row with the European Union that has fuelled fears of another crisis in the eurozone. While the China-US trade spat simmers, the source of angst among dealers especially in Europe had moved to Rome after Italy’s populist government last week passed a purse-busting budget that drew a rebuke from Brussels and warnings to abide by EU rules on public spending.

The EU’s reaction prompted Italy’s Deputy Prime Minister Matteo Salvini to threaten to seek damages for scaring off investors as the yield on government bonds surged, making it more expensive for Rome to borrow on international markets. But Finance Minister Giovanni Tria told a public meeting of the Confindustria industry confederation Wednesday the deficit would be squeezed “after 2019” as “we see confronting the reduction of public debt as fundamental,” quite apart from restrictions of European spending rules.

The budget drafted last week raises spending and pushes the public deficit to around 2.4 per cent of gross domestic product. Although Tria did not give figures in his Confindustria address, Italian media said Rome’s populist government would shave budget deficit targets for 2020 and 2021 to 2.2pc and 2.0pc respectively. Investors remained unconvinced, however, amid doubts that Rome would grasp the nettle.