Italy to respond to EU letter Monday
Italy is fully expecting the EU to reject its 2019 budget on Tuesday. In an unprecedented (but expected) step, they will ask them to amend and resubmit the budget because the budget deficit of 2.8% of GDP violates EU fiscal rules.
Italy is expected on Monday to submit a response to an EU letter asking for more details and expressing “serious concerns.”
Ultimately, the EU is left without much recourse. It would be extremely popular if they try to fine Italy or withdraw services.
Separately, Moody’s downgraded Italy on Friday to one level above junk but the outlook was moved to stable, which is going to be seen as good news by the market. S&P is set to render its verdict this Friday.