No Reaction To Latest Headlines Covering Italian Fiscal Situation, Weakness On U.S. ISM

No reaction in BTP futures as BBG sources note that “Giorgia Meloni’s government will confront drastically worsening budget figures when coalition leaders meet later on Wednesday.”

• The sources went on to suggest that “a much larger 2023 shortfall close to 5% of output — as measured on an underlying basis without one-off factors from accounting revisions — is inevitable given weakened economic growth and electoral promises including tax cuts, said the people, who declined to be identified because the numbers are still being discussed, and a final decision has not been made. The prior target was 4.5%.”
• A quick reminder that RTRS sources had previously suggested that “Italy is preparing to raise its 2023 budget deficit above the target of 4.5% of GDP set in April due to the impact of costly fiscal incentives for home improvements,” explaining the lack of BTP movement on the BBG story.
• Further out, it is worth remembering that an insight piece published by our policy team suggested that “the Italian government is considering limiting planned tax cuts or imposing new levies as it struggles to find EUR13-14bn in revenues to balance its budget plans for 2024.“
• BTP futures have since tested prior session lows on the back of the U.S. ISM services print.