Italy's cabinet on approved the country's expansionary 2019 budget bill late on Monday, Prime Minister Prime Minister Giuseppe Conte said. Conte told reporters the budget "keeps our promises while keeping public accounts in order", adding that the government had sent the budget framework to the European Commission in Brussels for its review.
Commenting on the budget, Italy's Economy Minister Tria said the budget measures are all fully covered and budget allows "early retirement and basic income tools."
Tria also said that a 2.4% budget is "normal" for a Western country (indicatively, today the US reported a 3.9% budget deficit), adding that the expansionary budget is necessary to counter the slowdown of the economy in the next year and said that concerns that the budget would spark a crisis in Europe are "totally unfounded."
Tria said that he "thinks" he will be able to explain the budget to Brussels, which is expected to oppose the Italian proposal vocally, and also denied denies plans to resign after the budget is approved in Parliament.
Meanwhile, Italy's deputy PM and interior minister Savlini said the budget does not include tax increases. He also said that he is "satisfied" with the 2019 budget and added that the early retirement bill will create some 400,000 jobs, while €500MM would be saved from lower migrant spending. Italy's other deputy PM Di Maio said the budget "cuts privileges" to fund income for the poor, adding that citizens income would start in Q1 2019.
And now we await Brussels' response response: the question is whether the EU will reject the budget outright which could unleash another bout of Italian bond volatility, or if it will be a long, drawn out process of back and forth negotiations which eventually culminates in the departure of Italy's populist government as yields and "lo spread" blows out, as Brussels seeks to make another example of the upstart populist government.