Italy's populist leader admits he checks financial markets before calling his kids every morning

Italy's Deputy Prime Minister Matteo Salvini, who once said his executive would stand up against market attacks, told an audience that he checks bond spreads every morning.

"Every morning, before calling my kids, I check the spread," Salvini, leader of the right-wing Lega party, told a business audience at The European House Ambrosetti Forum, in Lake Como, over the weekend.

The correlation between the Italian and the German bond market (spread) is often interpreted as a fear-gauge indicator.

Bond markets have particularly been vulnerable to Italian politics since the general election in March this year. Yields on Italian government debt have risen this summer by about 39 basis points (since July 17th) amid growing concerns that the new populist coalition government will increase public spending in 2019.

During those tense market moves, Salvini said that the government would stand up against market attacks and debt downgrades. In late August, Fitch ratings lowered the outlook of the Italian economy. Standard and Poor's is due to update its opinion on Italy next month.

"I was talking to some economists earlier about the correlations between political statements and spreads and I know that there are other dynamics," Salvini said in a press conference in Italy.

"But you know, better be safe than sorry. I can guarantee we will do everything to meet external regulations," he said, adding that his executive wants to meet European fiscal rules.

Italy has been in the spotlight because several campaign pledges from the two-elected parties could derail the reduction of government debt. This is crucial for markets because Italy has the second highest debt pile in the euro zone, at 130 percent of gross domestic product (GDP), and any issues in what's the third largest euro economy could potentially spread to the rest of the bloc.

Salvini's reassurances, together with recent comments from the economy minister, Giovanni Tria - that the 2019 budget will respect European deficit rules - have calmed down some of the earlier market concerns.

As a result, the yield on the 10-year Italian bond was slightly lower on Monday morning at 2.86 percent.

The Italian government is due to present its 2019 budget later this month and has to submit it to the European Commission by mid-October.

Let's block ads! (Why?)

from Top News & Analysis https://ift.tt/2oRVUwC
via IFTTT