The debate surrounding the incumbent Italian government’s use of funds has led to continued panic on financial marketplaces. Last month’s national budget released by the country’s coalition government showed greater spending plans than discussed earlier thereby pushing Italian share prices down and lowering the euro’s value.
Now, markets fear that the government’s plans will put the country at loggerheads with the European Commission because it will need to borrow more than estimated.
Breaking banks to deliver on promises
This is undoubtedly one of the cases where the government that takes office tries to break banks to deliver on its campaign promises. The current government’s aspirations to spend beyond the amounts the EC and other observers consider reasonable have slowed down Italy’s economy.
The drive to deliver on manifesto promises and the economy’s sluggish growth has once more raised doubts about the sustainability of Italy’s debts.
Plus, the EC could proceed to take legal action on the Coalition government for wanting to reduce the age of retirement and spend more on Welfare and Infrastructure using the money it intends to borrow.
Italy’s last budget draft to the European Commission anticipated borrowing equal to 1.6 per cent of GDP this year plummeting to 0.9 per cent and 0.2 per cent over the coming two years. Analysts have said these figures are comparable to what Italy is expected to use up by the end of a decade.
Largest Debt in EU
Still, Italy’s significant debt is one of the setbacks slowing down the economy. It has the most massive government debt in the European Union at €2.3 trillion.
Italian banks not able to hold the fort
According to Capital Economics, banks “are Italy’s weakest link.”The banks are responsible for over a quarter of the country’s debt. Plus they also have high rates of problem loans.
As if not enough, Italian banks may also find themselves defenceless to the renewed hearsay in worldpay reviews that the nation may exit the eurozone. If that happens, Italy would not be allowed to make deposits because account holders intend to prevent their money from being changed into a new national Italian currency.
Nonetheless, the fact that these banks hold a lot more capital compared to years ago is a bad sign as it means they have more capacity to take losses.
Big budgets are a perfect way to go forward if we have adequate funding to make them come true. But for Italy, it is evident that the incumbent regime is struggling to meet its pledges to citizens amid big debts that are threatening to dwarf the nation’s economy.
Author Bio:- Payment industry expert Taylor Cole is a passionate merchant account expert who understands the complicated world of accepting credit and debit cards at your business. His understanding of worldpay reviews has helped thousands of business owners save money and time.