Italy on brink of banking crisis as debt costs spiral following battle with EU
The Telegraph reports online today that Italy is on “the brink of a dangerous banking crisis as the red-blooded showdown” between Brussels and Rome pushes the country’s borrowing costs to a five-year high. Yields on Italy’s 10-year debt spiked to 3.62pc after the Lega strongman and vice-premier, Matteo Salvini, vowed to sweep away the existing European order. He called Jean-Claude Juncker and his Commission aides “enemies of Europe barricaded inside their Brussels bunker.”
The furious outburst followed the leak of a stern letter from the Commission rejecting the deficit spending plans of the insurgent Lega-Five Star government, and more or less ordering Rome to go back to the drawing board. The ‘risk spread’ over German Bunds is entering treacherous territory after jumping 45 basis points over the last week to 310. “At this point it risks going hyperbolic,” said Carlo Bastasin from the Brookings Institution.
Yesterday the Guardian reported that global stock markets staged a sharp sell-off amid growing concerns over a budget showdown between Italy and the EU and the prospect of weaker growth in the Chinese economy. “Italian borrowing costs jumped and the euro dropped on foreign exchanges as the war of words between Rome and Brussels escalated”, while shares on Wall Street and other major international markets declined amid growing concerns over the US-China trade war.