The Italian Finance Ministry published its updated Stability Programme yesterday . The document confirms a loose government budget in coming years.We forecast a more negative outlook for public finance than the government.
We expect higher government deficits than the government in the 2018-2021 period and a rising path of public debt-to-GDP ratio.Based on our analysis of the fiscal multipliers, we are sceptical that the fiscal easing proposed by the government will stimulate real GDP growth to rates above our forecast.
We maintain our view that a budget that puts public debt on a rising trend increases the risk of a series of ratings downgrades and leads to difficult discussions with the European Commission.
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