Italy\u2019s prime minister-designate laboured to finalise his cabinet team on Friday, as markets tumbled and ratings agency Moody\u2019s threatened a sovereign debt downgrade on fears the incoming government will embark on a spending spree. Giuseppe Conte, a political novice with no managerial or administrative experience, was given a mandate on Wednesday to form a government made up of the anti-establishment 5-Star Movement and the far right League, following inconclusive elections in March.<\/p>\n
The two parties have agreed a programme that includes slashing taxes and ramping up spending, which prompted Moody\u2019s late on Friday to place Italy\u2019s \u2018Baa2\u2019 debt rating \u2013 two notches above junk status \u2013 under review for a possible downgrade.<\/p>\n
The rating agency\u2019s move may exacerbate tensions on markets, which have already slid on fears that the incoming eurosceptic government will undermine fragile state finances.<\/p>\n
Markets are particularly on edge over the League\u2019s insistence on giving the pivotal role of economy minister to 81-year-old economist Paolo Savona, who has questioned Italy\u2019s membership of the euro.<\/p>\n
\u201cI\u2019m very angry,\u201d League leader Matteo Salvini said on Facebook on Friday evening, in an apparent reference to the dispute over Savona\u2019s position.<\/p>\n
\u201cNobody should fear change,\u201d he said earlier in the day, adding that he was working on a government that would make Italy \u201ca protagonist in Europe and in the world\u201d.<\/p>\n
The gap between Italian and German bond yields, a key measure of euro zone stress, surged to 216 basis points, its widest for four years, while Italy\u2019s bank stock index hit an 11-month low.<\/p>\n
Italy\u2019s 2.3 trillion euro ($2.7 trillion) debt \u2013 the world\u2019s third-largest and equivalent to more than 1.3 times the domestic output \u2013 makes the country vulnerable.<\/p>\n
Moody\u2019s cited a risk that the new government may fail to reduce public debt as key to its decision to review Italy\u2019s rating.<\/p>\n
\u201cFar from offering the prospect of further fiscal consolidation, the \u2018contract\u2019 for government signed by the two parties includes potentially costly tax and spending measures, without any clear proposals on how to fund those,\u201d the agency said.<\/p>\n
Moody\u2019s said it would wait to see whether the new government followed through on pledges to boost spending and scrap a 2011 pension overhaul which raised the retirement age.<\/p>\n
Italy will test investor demand for its debt next week, offering bonds at auction.<\/p>\n
Despite the recent surge, Italian yields are well below the peaks they reached during the euro zone crisis of 2011-2012, thanks mainly to the shield provided by the European Central Bank\u2019s bond buying programme.<\/p>\n
At the height of that crisis the spread between Italian and German 10-year bonds stood above 550 basis points.<\/p>\n
Conte is expected to present his cabinet team in the next few days and will then face confidence votes in both houses of the parliament.<\/p>\n
However, Savona remains a major stumbling block.<\/p>\n
He has decades of experience in academia, banking and government but has alarmed markets with his eurosceptic views. One former economy minister has called him \u201csuicidally anti-German\u201d.<\/p>\n
In his latest book he calls for a \u201cplan B\u201d to be drawn up to allow Italy to leave the euro zone with as little damage as possible should that prove necessary.<\/p>\n
League leader Salvini and 5-Star chief Luigi Di Maio look certain to enter the cabinet as interior minister and labour minister respectively.<\/p>\n","protected":false},"excerpt":{"rendered":"
Italy\u2019s prime minister-designate laboured to finalise his cabinet team on Friday, as markets tumbled and ratings agency Moody\u2019s threatened a sovereign debt downgrade on fears the incoming government will embark on a spending spree. Giuseppe Conte, a political novice with no managerial or administrative experience, was given a mandate on Wednesday to form a government […]<\/p>\n","protected":false},"author":1,"featured_media":32266,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[87],"tags":[],"class_list":["post-32265","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-world"],"_links":{"self":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/32265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/comments?post=32265"}],"version-history":[{"count":1,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/32265\/revisions"}],"predecessor-version":[{"id":32267,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/posts\/32265\/revisions\/32267"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/media\/32266"}],"wp:attachment":[{"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/media?parent=32265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/categories?post=32265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blastingskyhawk.com\/english\/wp-json\/wp\/v2\/tags?post=32265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}