Italy’s President Concerned About 2020 Budget, Official Says

John Follain
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Italy’s President Concerned About 2020 Budget, Official Says

(Bloomberg) -- President Sergio Mattarella is increasingly worried about how Italy will produce a budget for 2020, according to a senior state official.

The head of state’s main concern is who will draw up the budget plan this fall, with Italy’s fractious coalition squabbling more than ever, said the official, who asked not to be named discussing a confidential matter.

Mattarella is also anxious about how Italy’s obligations will be met, with the economy slowing and costly campaign promises to be funded, the official said.

Deputy Prime Minister Matteo Salvini of the rightist League on Tuesday upset markets with a threat to drive up government debt in a bid to create jobs.

The 77-year-old Mattarella, a Sicilian former minister and judge, worked behind the scenes with pro-European allies last year to ensure Salvini and fellow Deputy Premier Luigi Di Maio, of the anti-establishment Five Star Movement, not only negotiated on the 2019 budget with the European Commission, but also grudgingly agreed on spending cuts.

No one knows whether the government will continue or collapse after the European Parliament vote on May 26, the official said. If it falls and there is no alternative parliamentary majority, elections could be held as soon as September, the official said.

A September vote could leave the country without a government during the critical fall period when the budget is negotiated. Last year, it took three months to form an administration after the election result.

Coalition Future

While both Salvini and Di Maio have blown hot and cold on the coalition’s future during the European campaign, they’ve repeatedly said the government, sworn in by Mattarella last June, will serve its full five-year term.

Heightened tensions between Salvini and Di Maio in recent weeks have prompted speculation that the government could collapse, with several League lieutenants pressing Salvini to pull the plug.

The spread between 10-year Italian bonds and German debt with similar maturity widened about 5 basis points to 285 points.

“Market nervousness, which can be read in the spread fluctuations, is unjustified but understandable ahead of these important European elections,” Finance Minister Giovanni Tria said in a statement Wednesday. Italy’s government is already working on budget targets, the minister said.

The Italian president’s role includes dissolving parliament and naming the premier, who must win confidence votes in parliament. If one or both allies in the current coalition pulls out, Mattarella would then carry out consultations with party leaders to establish whether a new government can be formed.

The president would limit himself to hearing parties’ positions, and would dissolve parliament if there is no alternative majority, the official said, adding that parties might be resistant to the idea of summer campaigning that a September vote would require.

(Updates with finance minister in eleventh paragraph.)

--With assistance from Chiara Albanese, Dan Liefgreen and Lorenzo Totaro.

To contact the reporter on this story: John Follain in Rome at jfollain2@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, Jerrold Colten, Andrew Atkinson

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