Putin and Trump back Italy in EU budget spat
Russian President Vladimir Putin and Donald Trump have backed Italy in its budget battle with the eurozone.
Putin welcome Italian Prime Minister Giuseppe Conte in Moscow and unveiled business deals and hinted at the possibility of the purchase of Italian bonds.
In exchange, Conte called for the lifting of EU sanctions against Russia imposed in the wake of the illegal 2014 seizure of Crimea, calling Moscow “a strategic partner”.
Conte also received social-media support from the Oval Office.
Trump tweeted: “Just spoke with Prime Minister @GiuseppeConteIT of Italy concerning many subjects, including the fact that Italy is now taking a very hard line on illegal immigration. I agree with their stance 100%, and the United States is likewise taking a very hard line on illegal immigration. The Prime Minister is working very hard on the economy of Italy – he will be successful!”
Italy’s anti-austerity budget is packed with welfare spending and tax cuts, which Brussels says contravene eurozone rules and has given the new populist government until November 13 to make revisions or face possible sanctions.
The coalition of the hard-right League and anti-establishment Five Star Movement has refused to revise its generous programme, which forecasts a public deficit of 2.4 per cent of GDP next year. The previous centre-left administration pledged to keep the 2019 deficit to 0.8 per cent to address the country’s debt, which is estimated at an eye-watering €2.3 trillion.
European Central Bank governor Mario Draghi said he was “confident” a deal could be reached with Italy.
“It’s very important for the channels of communication to remain open… and I’m not going to be the one to close them,” Economic Affairs Commissioner Pierre Moscovici told the media. “We need to find a shared solution because Italy is a country at the heart of the eurozone … I can’t see an Italy without Europe.”
In Moscow, Putin did not rule out the purchase of Italian bonds by Russia’s National Welfare Fund.
“I believe the Italian economy has a strong foundation and we trust what the Italian government is doing,” the former KGB officer said. “From a political standpoint, we are not going to limit the work of the National Welfare Fund.”
Putin said Italian trade with Russia had nearly halved since 2013 to €24 billion a year with the sanctions reportedly cost Italian food producers €1 billion.
The budget dispute with Brussels has driven Italian borrowing costs to a four-year high.
“By proposing a budget heavy on debt-fuelled spending, the country started clashes both with the European Commission and with the market,” reported Fidelity International’s Andrea Iannelli and Alberto Chiandetti. “Neither has confidence in Italy’s projection that its economy will grow at a rate of 1.5 per cent, or that its current debt path is politically and financially sustainable.”
Italy’s banking sector is under pressure. Picture credit: Wikimedia