Italy Defies Europe, Agrees On 2019 Budget Deficit At 2.4% Of GDP

Despite the resistance of Italy's finance minister Giovanni Tria who had pushed back against demands by the League and the Five Star Movement to push Italy's budget deficit above 2% in 2019, demanding a hard stop at 1.6%, moments ago the Italian budget negotiations reached a successful conclusion, when Italy's Deputy Premier Matteo Salvini, and League leader, said that agreement had been reached on the 2019 deficit to be at 2.4% of GDP, as he and Di Maio demanded in recent days to fund what had emerged as key sticking point, namely Universal Basic Income for the people.

Commenting on the outcome, Italy's other deputy premier Luigi Di Maio, said he had succeeded in a "budget for the people" adding that the budget cancels poverty thanks to "citizen’s income," at a cost of €10 billion. He added that other measures include reform of job centers, pension reform, and a €1.5 billion fund for victims of bank crises.

Salvini and Di Maio said that Italy's government is united on the budget goal, although it was unclear if Finmin Tria would stay on after his "fiscally prudent" position had been rejected although Bloomberg reports that according to a League official, Tria had agreed with the 2.4% budget deficit target.

Attention now turns to how Brussels will respond as it will certainly not be excited. Ahead of the decision, EU Commissioner Moscovici was quoted in la Stampa, saying that Italy’s deficit must stay below 2%, while the final number is 0.4% above this.

For now, there has been little reaction in assets, with Italian debt yields unchanged on the news after getting hit earlier, while EURUSD dipped slightly and continuing to trade near session lows.