Conte Says Debt Is ‘Not Scary’ as Italy Races to Pass Budget Law
(Bloomberg) -- Prime Minister Giuseppe Conte played down the risk of Italy’s huge level of debt as he reaffirmed confidence in his coalition government’s controversial economic policies.
Debt “must be kept under surveillance, but it isn’t so scary,” Conte said at his year-end press conference in Rome on Friday. “Italy’s economic fundamentals are very solid.”
The populist government is racing against the clock to pass its 2019 budget law before a December 31 deadline, after a weeks-long standoff with European Union partners.
A final vote over the budget is expected Saturday. As Conte spoke, proceedings to pass the budget in the lower house of parliament were temporarily suspended as lawmakers disagreed over last-minute changes, increasing the risk of a delay in the voting process.
While negotiations with Brussels ultimately brought Italy’s deficit target for 2019 to 2.04 percent from an original proposal of 2.4 percent, the spending spree envisaged in the budget risks increasing the country’s debt unless ambitious growth targets are met. Italy’s debt is more than 130 percent of gross domestic product, the second-highest ratio in the euro area after Greece.
Demand for the country’s debt increased in the year’s last auction. Italian bonds gained after the Treasury sold 4.25 billion euros ($4.9 billion) of five- and 10-year bonds on Friday. The 10-year spread to German debt tightened to 247 points, the narrowest since September.
Speaking Thursday evening as the parliamentary wrangling dragged on into the night, Finance Minister Giovanni Tria said the deal reached with the European Union offers the best possible outcome.
Conte said Friday that the 1 percent growth penciled into the 2019 budget law is a “minimum threshold.” That target exceeds the forecasts of most economists and international institutions.
“It’s impossible that we won’t achieve robust growth,” Conte said.
Conte also did not rule out possible changes in the government’s composition if those will be shared by government coalition leaders.
©2018 Bloomberg L.P.