European Central Bank
President Mario Draghi said Thursday that Italy was a factor of
uncertainty for the eurozone's economic outlook, along with
Brexit and the threat of an international trade war.
He added, however, that he was "hopeful an agreement will be
found" between Rome and Brussels over Italy's draft budget plan.
The European Commission has rejected the plan, which sees
Italy running a deficit of 2.4% of GDP next year as part of an
expansive budget aimed at boosting growth, and told Rome to
rewrite the package within three weeks.
The government has said it does not intend to change the
budget.
The pressure on Italy's bonds has intensified amid the
tension between Brussels and Rome, with the spread between the
10-year BTP and the German Bund over 300 basis points.
"I don't have a crystal ball, (I don't know) if it will be
300, 400 (points) or anything else," he said.
"These bonds are certainly in the portfolios of the banks. If
they lose value, that hits the banks' capital.
"If you ask me what to do about the banks given the rise in
the spread over the last six months, an initial response is to
reduce the spread and not put into doubt the institutional
framework that supports the euro".
Draghi said there was no risk of the ECB's approach changing
to accomodate the Italian government's fiscal policy.
"Financing deficits is not in our mandate," he said.
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