EUR: Italy and the EC at loggerheads

As expected, the European Commission rejected Italy’s budget proposals yesterday and demanded that they rewrite the plan. Italy now has three weeks to respond with fresh
proposals, although Prime Minister Giuseppe Conte said that there was no plan B and that there would be no smaller deficit. He was prepared to tweak Italy’s fiscal plans, but
feels that the 2.4% of GDP is essential to meet its election pledges in 2019.

The news rattled the stock markets which tumbled to their lowest mark since September 2017. There is a considerable amount of turmoil taking place across the world at the
moment, and it will be hoped that at least some of the issues can be ironed out sooner rather than later. It would be truly wonderful if everyone could just get along and play
nicely.

The only release of note from the eurozone yesterday was the flash consumer confidence reading for October which came in at -2.7 but was better than the -3.2 analysts had
expected. The figure actually improved from -2.9 the previous month. Today is extremely busy, with a raft of purchasing managers’ indices from Germany and the eurozone.