Leak of Italian government programme rattles financial markets
- Author: Wendy Palmer May 18, 2018,
May 18, 2018, 9:34
A leaked draft of the coalition programme revealed the eurosceptic team will demand a renegotiation of Italy's European Union budget contributions, the dismantling of a 2011 pension reform that raised the retirement age, and an end to sanctions against Russian Federation.
The League's senior economic adviser said the parties were simply seeking an "accounting change" so that debt issued by eurozone countries and purchased by the European Central Bank should not be counted in debt-to-GDP ratios.
The yield on benchmark 10-year Italian government bonds climbed above 2pc for the first time since March on the news, although there was little sign of contagion spreading to other borrowers.
On Thursday, the EU's statistics office said it can not exclude Italian bonds held by the European Central Bank from its debt calculations.
The Italian stock market and treasury bonds fell after a draft proposal from Italy's two main populist parties outlined a plan to change radically the country's relationship with the rest of Europe, MarketWatch reports.
The opposition Democrats have warned that the League's vow to drastically lower taxes to a flat 15-percent rate and the 5-Stars' promise of subsidies to the poor will drastically drive up government borrowing.
A draft of the accord reviewed by Reuters earlier on Thursday spelt out a spending plan that would breach European Union rules on fiscal discipline: cutting taxes, increasing welfare payments for the poor and scrapping an unpopular pension reform.
Some of the other items still in red in that version include parts of a hardline immigration policy that would see Italy increase detentions of undocumented immigrants and speed up deportations.
Scrapping the unpopular pension reform would cost 15 billion euros, another 12.5 billion is needed to head off the planned hike in sales tax, and the parties are also considering printing a new, special-purpose currency to pay off state debts to firms.
Mr Iannelli claimed the newly drafted demands would be "illegal" and not in compliance with the bloc's core Maastricht Treaty. 5-Star has moderated its position considerably in the a year ago, rowing back on a previous plan to hold a referendum on Italy's membership of the currency bloc.
Both parties have a history of Euroscepticism.
It is still far from clear whether Five Star and the League are prepared to go all the way - and in fact the bluster on the euro may simply be the product of a political compromise in their negotiations that will never translate into policy.
On Tuesday, the League said it was ready to wage war on the European Union budget rules and put "Italians first".
The two anti-system parties have completed the joint policy programme for a coalition government and have passed the document to leaders for their approval.
There was still no word on the thorny issue of who would be prime minister.
News of the draft accord has caused concern in Brussels, where European Commission Vice President Valdis Dombrovskis told the EU parliament on Thursday that Italy's new government should stick to fiscal discipline and keep reducing public debt.
Mattarella has repeatedly stressed the importance of maintaining a strong, pro-European stance.
They are now using less strident tones, and a 5-Star official said on Friday any plans to raise the budget deficit will first be discussed with Brussels in a "courteous" way.