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Bloomberg
Italian Deputy Premiers Matteo Salvini and Luigi Di Maio are trying to preserve a five-month-old alliance after their first serious dispute, criticism of their budget from the European Union and a downgrade by Moody’s Investors Service brought tensions to a boiling point.
“The government will keep going despite the rating agencies, European commissioners and some internal misunderstandings,†Salvini said at an event in northern Italy, according to Ansa news agency.
Salvini rushed back to Rome on Saturday for a cabinet meeting after Di Maio, leader of the anti-establishment Five Star Movement, accused Salvini’s pro-business party, the League, of secretly sweetening a tax amnesty proposal that he’d only grudgingly agreed to in the first place, sparking rumors of a government crisis.
The populists are under fire from all sides, with EU leaders attacking their budget plans at a summit meeting in Brussels this week and bond yields touching a five-year high on Friday. The EU Commission has given Italy until noon on Monday to provide an explanation for the “obvious significant deviation†from the budget rules.
Moody’s cut Italy’s credit rating late Friday to one level above junk on concerns about the nation’s fiscal strength and the stalling of plans for structural reform. The country’s rating has never been this low, not even in 2011 when Silvio Berlusconi’s government was forced to step down in the midst of an acute debt crisis that had sent the yield spread between Italian and German 10-year bonds to over 550 basis points. The yield spread is currently at 302 basis points.