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Italy: Judged “particularly seriously” non-compliant by EC – Danske Bank

Analysts at Danske Bank note that the European Commission announced its final verdict in Italy’s 2019 budget plan and is judged to be “particularly seriously” non-compliant with the debt criterion (i.e. insufficient reduction in its debt/GDP ratio) and the budget envisions marked backtracking on past growth-enhancing structural reforms which warrants opening of a debt-based excessive deficit procedure.

Key Quotes

“The report is the first step before formally opening an excessive deficit procedure after a qualified majority vote at the ECOFIN council. However, the Italian BTP market led the EGB yields lower as according to media, Salvini for the first time in weeks struck a slightly more conciliatory tone towards the EU.”

“Given the improved risk sentiment and the apparent new rhetoric from Salvini it points towards further BTP performance today.”

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