Italy lowers growth forecast

The government now expects GDP growth of 1.2 percent this year, up from 1.5 percent. The country, which has been ravaging the markets since the presentation of its budget deficit, shows the lowest growth forecast in the euro area.

Less growth and a galloping deficit: Italy's indicators are not looking good. Rome has indeed reduced its growth forecast for 2018 from 1.5% to 1.2% in an update of the Economic and Financial Document (DEF) of the government released this Friday. The Italian Minister of the Economy had already mentioned such a hypothesis. This forecast is the lowest of all countries in the euro area and remains lower than that of the European Commission which expects 1.3% growth this year for Italy and 1.1% in 2019. The country also revised up its budget deficit forecast to 1.8% of GDP compared to 1.6% so far.

The country's economic health is raising fears and worries on the part of Brussels and the financial markets. To the point that Mario Draghi met the Italian President Sergio Mattarella. According to La Repubblica and La Stampa, the president of the European Central Bank (ECB) has highlighted the risks that would be linked to a negative reaction of the markets to the new budget of the country.

Warnings from Europe

Presented last week, this expensive budget has frightened the markets. The government had projected a public deficit of 2.4% of GDP for the next three years. A much heavier target than expected, while the previous center-left government was aiming for a target of 1.6%. In the process, the Milan Stock Exchange had lost nearly 4% and the spread between German and Italian government bonds, a barometer of investor confidence, had soared.

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A rout accentuated by the Europhobic statements of the Chairman of the Budget Committee of the Chamber of Deputies, Claudio Borghi, one of the heavyweights of the League (far right) that makes up the government with the 5-Star Movement. In asserting his conviction that his country would better solve his problems without the euro, he had forced the head of the government, Giuseppe Conte, to take the floor to say that Italy could not give up the single currency. Eurozone finance ministers warned Italy over compliance with EU rules.

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On Wednesday, the government finally lowered its public deficit forecast. If it has maintained at 2.4% for 2019, it should decline in the following years to 2.1% in 2020 and 1.8% in 2021, promised Giuseppe Conte, at a press conference. The government has also ensured that Italy's overall debt, which represents more than 130% of its GDP, is the highest level in the eurozone after Greece, is falling.

As for Italian Council Vice-President Matteo Salvini, he accused the main European Commissioners - Jean-Claude Juncker, the President of the European Commission and Pierre Moscovici, the European Commissioner for Economic Affairs in particular, of destroying the European Union and He said he hoped for change with the 2019 European elections. "Italian policy remains a thorn in the foot of the euro," said Neil Mellor, an analyst for the US bank BNY Mellon, quoted by AFP. On Friday, the euro weakened against the dollar 1.1496 dollars, against 1.1514 dollars the day b