Keyword: Italy

This week's IGM European Economic Experts Panel statements: A) The fiscal rules of the European Union should give more flexibility to member countries. B) The Italian budget for 2019 that the European Commission rejected in October would have increased Italy’s risk of fiscal insolvency substantially. C) If France runs a 2019 budget deficit of around 3.4% of GDP, as announced by President Macron’s government, France’s risk of fiscal insolvency will increase substantially.

This week's European IGM Economic Experts Panel statements: A) Setting the EU rules aside, and assuming it would take 2.5% of Italy’s GDP to recapitalize its banks, the Italian government would improve financial stability in Europe if it injected this amount of public funds into its banks. B) If Italy were to inject public funds into its banks without imposing losses on at least some claimants, an important cost would be the effect on future incentives (economic or political) in Europe.

This week’s IGM Economic Experts Panel statements: A. Even if all the official-sector funding that Greece received from 2010 through August 2012 is written off, propping up Greece to buy time for the rest of Europe to prepare for Greek default has been better for citizens of the Eurozone outside of Greece than a policy that would have cut off funding sooner. B. A substantial sovereign-debt default by some combination of Greece, Ireland, Italy, Portugal and Spain is a necessary condition for the euro area as a whole to grow at its pre-crisis trend rate over the next three years. C. Unless there is a substantial default by some combination of Greece, Ireland, Italy, Portugal and Spain on their sovereign debt and commercial bank debt, plus credible reforms to prevent excessive borrowing in the future, the euro area is headed for a costly financial meltdown and a prolonged recession.

This week’s IGM Economic Experts Panel poll statements: A) Credible assumptions for inflation, GDP growth and primary budget deficits in Italy imply that either the Debt-to-GDP ratio in Italy would increase sharply if Italian interest rates on 10-year government debt remained at the November 30 level of around 7 percent or Italy would lose access to the bond market. B) Absent outside help to deal with runs, such as a pledge of fiscal support from Germany or an unlimited commitment by the ECB to buy bonds, there is no spending-and-tax plan Italy can announce that would be credible enough to hold its interest rates low enough to stabilize its Debt-to-GDP ratio.