Salvini Says Italy Could Aid Banks Again If Spread Hits Too Hard

(Bloomberg) -- Italy’s populist government is ready to ride to the rescue to help its banks if a widening spread between the country’s bonds and German debt puts them under excessive strain.

"If companies or banks need us, we’re here,” Deputy Prime Minister Matteo Salvini said Thursday in remarks cited by Reuters. Salvini, attending a horse show in the northern city of Verona, was responding to a question on the potential impact of a wider spread.

Speaking on horseback, Salvini said events like today’s could help create jobs in the country, which suffers from chronically high unemployment.

At an earlier event Thursday, the minister defended his government’s 2019 draft budget, which has been rejected by the European Commission, claiming it will create jobs and boost growth.

“Jobs are the backbone of our budget law," Salvini said, adding that contrary to press reports, the coalition is in full agreement on budget details. Salvini’s rightist League party leads the government with its partner, the anti-establishment Five Star Movement.

Salvini’s top adviser Giancarlo Giorgetti said earlier this week the government is ready to step in to help any banks suffering from rising bond yields. Italian banks could need recapitalization if the gap between yields on the country’s sovereign debt and German bonds nears 400 basis points, he said.

Yields have risen and spreads widened amid the budget rift between Rome and Brussels. The spread between Italian ten-year government bonds and their German equivalents was at 312 basis points at 1:35 p.m. Rome time on Thursday.

Prime Minister Giuseppe Conte told Bloomberg News on Tuesday the government has no "Plan B" for its budget even as the European Union demanded unprecedented changes to bring the country into line with spending rules.

©2018 Bloomberg L.P.