Forget the EU: Bond Market Ready to Keep Italian Budget in Line
- Anything above EU’s 3 percent deficit limit could roil debt
- Italy government should be wary of markets: Aberdeen Standard
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Italy’s fledgling government may have no greater incentive than the bond market to ensure it stays within European Union spending rules.
Should the Five Star Movement-League coalition break the bloc’s deficit limit of 3 percent of gross domestic product, the premium to hold Italy’s debt over Germany’s could blow out to 470 basis points -- a level not seen since the euro-area debt crisis. If the government plays ball in the September budget, it may be rewarded with the same or even lower borrowing costs than at present, according to median forecasts in a Bloomberg survey of banks.