Published On: Sat, Oct 13th, 2018

Bank chief in urgent order to Italy to STOP questioning euro as nation ‘causing damage’ | World | News

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Rome’s eurosceptic government needs to “calm down” over its bitter ongoing budget stand off with Brussels, Mr Draghi threatened.

Italy’s populist coalition is embroiled in a war of words with European officials over Rome’s plans to triple its deficit next year.

The budget plans backtrack on a previous Italian promise to narrow the spending gap, but the EU is refusing to budge.

Italian bond yields rose sharply this autumn after a senior official from one of the ruling parties argued Italy would benefit from leaving the euro.

Mr Draghi said: “A budgetary expansion in a high-debt country becomes much more complicated…if people start to put in question the euro.

“These statements… have created real damage. The very first thing to do is to calm down with the tone.

“And then the second thing is we have to wait for the facts.”

Italian prime minister Giuseppe Conte’s government wants its deficit to be 2.4 per cent of Gross Domestic Product (GDP).

But the EU insisted Rome must respect Brussels’ rules, with an agreed 0.8 per cent budget deficit set by the previous centre-left government.

Italy’s current ruling Five Star and League parties are due to submit the new 2019 budget plan to the EU by next Monday.

They have vowed to “abolish poverty” by introducing tax cuts, minimum basic income, new social welfare policies and higher pensions.

But Italy’s public debt is 130 percent of GDP and totals £1.97trillion.

Mr Draghi has rejected accusations from members of the Italian government that the ECB’s plan to phase out asset purchases by the end of the year had inflicted further financial misery.

He said markets had not reacted to the ECB’s decision to end its asset buys, but had moved specifically on local Italian issues.

The narrowing of the yield difference between Italy and Greece was evidence that the problem is focused on Italian debt, Mr Draghi claimed.

As the ECB is buying Italian but not Greek bonds, a bigger rise in Italian yields would suggest investors are not acting on overall ECB policy change but a local issue, Mr Draghi claimed.

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