A major eurozone country has elected new leadership on promises to loosen the purse strings in defiance of bond markets, Berlin and bureaucrats in Brussels. The message to Chancellor Angela Merkel, Europe’s most powerful leader, is uncompromising: “People have made a choice which envisages a renegotiation of the fiscal treaty. It’s not Germany that decides for the whole of Europe.” These are not the words of Italy’s populist leaders preparing to send a rule-breaking budget to Brussels, the Financial Times reported.
Italian banks face a 102 billion-euro headache, just when they’re least ready to deal with it, Bloomberg News reported. That’s how much they’ve lent to the country’s stumbling construction companies, according to data from the Bank of Italy. But with Astaldi SpA readying plans to restructure as much as 2.5 billion euros of debt, three of the top six Italian builders are now either insolvent or negotiating with creditors. The construction sector accounts for the highest default rates in Italy, the data show.
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Greece’s central bank governor has blamed Italy’s market turmoil for a drop in the share prices of Greek banks, saying that the falls “are not related to the soundness of Greek banks”. Italian government bonds have seen a fresh sell-off in recent days, as investors mull the growing likelihood that Rome will face-off against Brussels over a budget-busting spending plan, the Financial Times reported. In the past two weeks the yield on 10-year Italian debt has risen by 80 basis points, to hit 3.712 per cent — its highest level since early 2014.
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Brussels has been “overly generous” to Italy’s government, allowing it to flout the EU’s budget rules last year, the head of an independent watchdog has said, fuelling criticism of the European Commission’s policing of the bloc’s public finances, the Financial Times reported. Niels Thygesen, the chair of the European Fiscal Board, told the Financial Times the European Commission had gone “beyond” the necessary flexibility allowed to Italy during the country’s budget negotiations with Brussels in 2017.
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A six-month delay in the government’s decision over the future of Alitalia would only worsen the carrier’s situation, one of the state-appointed commissioners managing the ailing airline said on Tuesday, Reuters reported. “I am not aware that there is an intention to procrastinate, but postponing a decision that must be taken one way or the other would only make problems worse,” said Luigi Gubitosi. On Saturday a government source said that Italy was working on extending by as much as six months a Dec.
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Italy’s finance minister has tried to stem growing concern over Italy’s budget plans as the country’s borrowing costs touched new four-year highs despite assurances that Rome wanted to calm tensions with investors and with the EU, the Financial Times reported. Speaking to Italian lawmakers, Giovanni Tria said the populist coalition would not deviate from plans to widen the country’s deficit to sharply increase spending.
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The spread between the cost of Italian and Spanish debt is at its highest level for more than 20 years, in a sign that investors remain unconcerned about the future of the eurozone despite Italy’s spiralling bond yields, the Financial Times reported. Italy’s 10-year yield hit 3.71 per cent on Tuesday, its highest level since February 2014, after the country’s finance minister Giovanni Tria failed to alleviate growing investor jitters over its fiscal position. Short-dated bond yields also rose, although they remain below the highs they hit earlier this year.
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Italy is working on an Alitalia rescue plan that would see the state taking a stake of around 15 percent in the carrier along with separate investments by state-owned firms such as Ferrovie dello Stato and a foreign player, Il Sole 24 Ore said on Sunday. Once a symbol of Italy’s post-war economic boom that has recently struggled to compete with low-cost carriers and high speed trains, Alitalia was put under special administration last year after workers rejected a rescue plan, Reuters reported.
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