Breakingviews - Italy’s fiscal weakness toughens its green plight
Giorgia Meloni’s bond market honeymoon is over. Her hard-right government hiked on Wednesday its budget deficit targets to 5.3% of GDP this year and 4.3% in 2024, higher than the previous goals of 4.5% and 3.7%. Rome also cut its GDP forecasts to 0.8% and 1.2% over the next two years, from 1% and 1.5% before. The ballooning deficit is chiefly a result of ill-fated renovation incentives introduced by previous governments and amounting to some 140 billion euros, or 7% of Italy’s GDP. Record-high euro zone interest rates are also increasing the cost of servicing Italy’s mammoth debt, seen at 140% of GDP by year-end. The yield gap between Italian 10-year government bonds and their German equivalent rose to 197 basis points, the highest since March.
