ROME (Reuters) – Italy needs to respect its fiscal targets if it wants to retain the confidence of investors over its capacity to repay its debt, Bank of Italy Ignazio Visco said on Saturday, as Rome is facing a budget tussle with Brussels.
“Surely, trust in Italy also depends on the ability to meet targets and not to change them,” said Visco at a conference in Venice adding that “trust in public debt (reimbursement) must be sought with every effort”.
Italy is negotiating a budget revision with Brussels to try to prevent an EU disciplinary procedure.
The European Commission wants Italy to reduce its debt this year and next and has opposed the wide tax cut plans of the ruling coalition if they are not offset by new revenues or spending reductions – options that Rome has so far dismissed.
In remarks that may complicate talks with the European Commission, Italy’s Deputy Prime Minister Matteo Salvini on Friday threatened to resign and bring down the government unless he can push through at least 10 billion euros (£8.92 billion) of tax cuts.
Visco, who did not mention Salvini or any other politician specifically, also warned about “fuelling the fear” of Italy breaking away from Europe if the government defies Europe over its budget and supports anti-EU policies.
“Markets insure themselves against this risk by demanding various basis points of higher interest rates” on Italian debt, he said.
(Reporting by Giselda Vagnoni; Editing by Alison Williams)