Italy set to tell EU it won't back down on 2.4% deficit target

Italy’s populist coalition will tell the European Commission it’s sticking to a 2019 budget plan with a 2.4% deficit target, though changes are possible depending on the bond yield spread and economic growth, news media reported.

The government will send its response to the Commission at 11:55 am on Monday, newspaper La Repubblica reported, without saying where it obtained the information. Italy “is going forward with a budget in ultra-deficit, brushing off the European Union’s rejection and the hatchet job by the markets,” according to Repubblica.

The European Union has told Italy its 2019 budget plan represents a “significant deviation” from the bloc’s rules.

The final budget law will include monitoring and possible spending curbs to stay within the 2.4% deficit target, depending on economic growth, Repubblica said.

Italy’s government will say it seeks a dialogue with European Union, newspaper Corriere della Sera said. But it also reported that Italy refuses to change the budget plan.

Newspaper Il Messaggero reported that Italy plans counter-measures in the event the 10-year bond yield spread with German bunds hits 400 basis points.

The plan would include spending changes, according to Messaggero. The spread was 287 basis points as of Monday morning.