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Reports: Italy bonds rally after new coalition's expansionary 2020 budget

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Reports: Italy bonds rally after new coalition's expansionary 2020 budget

Italy's Five Star Movement party and the opposition Democratic Party set out an expansionary budget for 2020 as part of their planned coalition government's agenda, Reuters and Bloomberg News reported, citing a draft document.

The two parties reportedly plan to drop the planned sales tax hike due in 2020 and reduce taxes on labor while introducing minimum wage without putting public finances at risk. They will seek to increase spending in a number of areas and introduce a web tax on international companies, Reuters reported.

The parties would also request a review of Brussels' budget rules.

Italian bonds rallied, and 10-year yields declined 7 basis points as of 1:48 p.m. local time.

Italy averted a disciplinary action from the EU in July under the anti-establishment Five Star Movement and League Party governing coalition by proposing new measures that could lead to a smaller 2019 deficit than previously projected.

Prime Minister-designate Giuseppe Conte is due to inform President Sergio Mattarella about the progress on forming a coalition as early as today. The parties struck an agreement Aug. 28 to form a coalition after the Five Star Movement's previous governing coalition collapsed earlier in August due to policy differences, which forced Conte to step down.

Meanwhile, Five Star supporters are polling online on the party's coalition deal with the Democratic Party, with results due later in the day.