13.05.2018 | New Italian government set to defy EU - and riskbankrupting Italy in the process
Source - The Sund

The anti-establishment 5-Star Movement and far-right League are close to sealing a coalition deal nearly three months after the country’s general election. Both parties have made a series of expensive economic promises - with a combined estimated cost of £110billion (€124.5bn) - including a massive tax cut for individuals and companies, a boost in welfare and a basic “citizens income”. But the cash-strapped country has already committed to reduce its budget deficit and public debt, which at more than 130 percent of gross domestic product, is the highest in the eurozone after Greece. Not only will the economic pledges be extremely costly to implement, the proposed reforms could push Italy’s deficit well above targets agreed with the EU. League leader Matteo Salvini said on Saturday: "We will need to renegotiate EU agreements to stop Italy suffocating.” His party’s hallmark policy is a flat tax rate of 15 percent for businesses and individuals. It would cost Italy an estimated £70.5bn (€80bn) every year in lost tax revenue. Meanwhile, Luigi Di Maio’s 5-Star Movement has pledged to implement a basic income scheme for the poor which the party has costed at around £15bn (€17bn) per year. And while their language has softened since beginning coalition talks, they have not ruled out the possibility of revising Italy’s deficit target. Wolfango Piccoli, co-president of geopolitical risk advisors Teneo Intelligence, said taking on Brussels would be popular with Italian voters. And he said the new government had little to fear from a European Commission which "is very weak and on its way out". Jean-Claude Juncker’s Commission, with just a year of its term remaining, "can't really do much other than put Italy's finances under greater scrutiny, and markets don't care about that", he said. Leaders from 5-Star and the League are continuing to thrash out a coalition deal which strikes a compromise over their very different agendas.

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