Home » Currency Note » Currency Note » EC rejects Italian budget for 2019

Following Italy’s populist government’s refusal to change its deficit target of 2.4% of GDP, the European Commission announced its decision on budget drafts yesterday. Somewhat unsurprisingly, the EC rejected the Italian budget proposals for 2019, saying that Rome has ‘seriously violated’ debt rules and it will begin disciplinary procedures. Soon after, Matteo Salvini, Italy’s Deputy Prime Minister and leader of the far-right Northern League said ‘A letter from the EU? I’m also waiting for one from Father Christmas.’

The European commissioner, Pierre Moscovici, said the door is still open for Italy to change its budget plans, but several market analysts predicted that the whole process will now drag on into next year. If Italy refuses to cut its spending plans, then it is possible it could be 0.5% of its GDP. This would not be great news and could prove something of a crisis in the coming months. There was little reaction to the news in the markets and the euro managed to make gains against sterling and the dollar. Italian bonds held onto their earlier gains which were brought about by hopes a compromise would be reached.

It’s Thanksgiving today, so everyone in the US will be taking a break today, but there was a deluge of data yesterday, the majority of which was slightly disappointing. More details of that below. In the UK, public sector net borrowing came in worse than expected, as – excluding state-controlled banks – figures showed the UK borrowed £8.8 billion last month, which was £1.6 billion more than in October 2017 and the highest October borrowing for three years.

In PMQs, Theresa May yet again claimed that voting down her Brexit deal could lead to the UK remaining in the EU. Jeremy Corbyn said that now ministers have confirmed leaving the EU without a deal is not an option – could May guarantee there are no circumstances in which this could happen? May responded by saying if her deal was rejected by Parliament, ‘it could risk no Brexit at all’. Bizarrely, she later responded to a question from Esther McVey by saying the UK will leave on 29 March. Will this uncertainty never end?

With so much lack of clarity about what’s on the horizon, don’t leave your budget exposed to risk. Your Personal Trader can agree a forward contract to secure a single exchange rate for up to 12 months. Speak to them on 020 7898 0541 to find out more about how they can protect your money.

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