020 7898 0500The euro weakened sharply against the dollar and Italian markets fell on Friday as fears over Italy’s deficit plans continued to grow. The Italian government is targeting a budget deficit of 2.4% of GDP for 2019, which is far higher than the 0.8% outlined by the previous government. The increase is said to be because Italy’s populist coalition wants to deliver specific campaign promises.
However, the European Commission is unlikely to be happy about the news, with Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, warning Italians that increasing debt would deplete services elsewhere. While Moscovici did say he wanted to avoid confrontation between Italy and the EC, he did say that the EC didn’t want Italy to show disrespect for the rules and increase their already sizeable debt.
Meanwhile, inflation in the eurozone increased to 2.1% in September from 2% the month before. This was in line with expectations and matches July’s five-and-a-half-year high. Unemployment in Germany was better than expected, by falling to 5.1% in September when it had been expected to hold steady at 5.2%.
It is a very busy start to the week for the eurozone, as we will see retail sales in August across Germany, as well as the Markit manufacturing PMI data from Germany and the eurozone in September. We will also see the eurozone’s unemployment rate for August.
