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Edition 24 October 2018 - Crédit Agricole S.A.
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  • Edition 24 October 2018

    Italy – Public Finance : 2019 budget, a European challenge

    All eyes are glued to the 2019 draft budget. The power struggle between the Economy Ministry and the leaders of the two governing parties was won by the latter. Finally, the deficit will definitely rise to 2.4% in 2019, but will fall to 2.1% in 2020 and 1.8% in 2021. We will, therefore see a fiscal expansion next year, but the fiscal stance will subsequently become neutral once more. The long march towards a cancellation of the structural deficit will then resume from 2022.

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  • Contents:

    - The point of departure
    - The 2019 budget
    - The measures
    - The risks
    - The impact on sustainability
    - The European Commission s response
    - Investor reaction
    - The rating agencies' reaction
    - Conclusion

  • Extract:

    The Commission has already pointed out in a letter to the Italian government that the deficit targets "appear prima facie to point to a significant deviation from the fiscal path" commonly agreed by the Council in June when approving the Stability programmes. These words point to the threat of a significant deviation procedure if the government did not make changes to the draft budget. Under this procedure it would be necessary to have observed a significant deviation ex post when the figures for the 2019 deficit are published in March 2020 before the procedure can be initiated. However, the risk of a significant deviation had already been flagged up for the 2018 budget, which would allow the Commission to launch the procedure as early as March 2019, once the deviation from the deficit figures for 2018 are verified.

  • Italy: Country and Sovereign rating

    The reaction of rating agencies has been rapid. Moody's has lowered the Italian country and sovereign rating to one notch above the speculative grade, stabilizing the outlook. The decision had already been anticipated by investors ou feared a new negative outlook, which would have initiated the path toward a new and more decisive downgrade.

    Italy: Country and Sovereign rating
  • Associative topics : Economics | Italy


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