The unelected Superstate leadership for the European Union in Brussels has reprimanded Italy’s populist government fro breaking EU deficit rules in its first budget – a spending plan that Italy feels is justified for its nation. Well, it is their money after all, raised from Italian taxes payers. The EU rebuked Italy and this of course sent shock waves through the Italian market, driving up borrowing costs to their highest in years in four years. Italy is, like Hungry and Poland charting its own course for its future. Brussels sent a formal letter to the Italian government warning them that they are breaking EU rules and the consequences could be serious. Italy’s Prime Minister, fired back at Brussels with a comment that pointed to a belief in their well thought out budget, the Italians believe they are doing the right thing for the Italian citizens who elected them.
The budget hammered out by Rome envisages a deficit three times the size that Brussels recommends which is the EU mandated target. Germany is making it clear that it stands with the EU and that Italy must fall in line and abide by the rules laid out by the European Union. The Dutch elected officials are also leaning on Italy in an effort to bring this Southern European country back in line. Some are saying that Italy is jeopardizing broader talks for a more integrated European Union.
This recent upset in Italy forced bonds to back up, with the 10-year bond trading to 3.70 percent, the highest in years. The fine that Brussels can impose on Italy can be as high as 0.5% of the gross domestic product. That would surely impact bond markets, right?
There seems to be a growing dissatisfaction with Brussels and the unelected leadership of the European Super State.