Unease surrounding Italian debt had been growing steadily since the election of a populist ruling coalition in March, but market fears suddenly dissipated last week on speculation that the government would not push the envelope in its upcoming budget proposal.
Italian Foreign Affairs Minister Enzo Moavero gave more assurances in a radio interview on Tuesday, saying that the government had no intention of locking horns with the European Union over the proposal.
Italy’s government is “determined to pass a sound budget that will stem market speculation,” Moavero said in the interview, as quoted by Reuters. “I do not expect a clash between Italy and the EU over the budget,” he added.
Italian government bonds rallied on the comments, following a similar market reaction to Italian Economy Minister Giovanni Tria’s prediction on Sunday that yields would drop once the budget for 2019 was unveiled.
The proposal is expected this month, after which it must be submitted to the European Commission for approval.