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Opinion
Marcus Ashworth

Italy Is an Accident Waiting To Happen

Bond investors are starting to position for a seemingly inevitable repeat of last year’s budget showdown between Brussels and Rome.

The markets are already voting with their feet.

The markets are already voting with their feet.

Photographer: Filippo Monteforte/AFP
Corrected

We all know Italy’s next crisis is coming, it’s merely a question of when. The country’s budget deficit is slipping out of control and Brussels will at some point have to address the increasingly likely breach of its fiscal rules (even if the EU is turning a blind eye while this month’s European parliamentary elections are taking place). The bond market is starting to wake up to the risk.

The chances of Italy ever achieving its initial 2.04 percent deficit target for 2019 – already revised up to 2.4 percent – were always fanciful. But as the economy slips into recession, that newer figure looks dicey as well. The miss might well be too big for the European Commission to sweep under the carpet.