Previously scheduled debt repudiation

Macron’s concessions add fuel to Italy’s debt fire

It seems that in Italy misery loves company. In the midst of their own budget travails, Luigi di Maio and Matteo Salvini, Italy’s two powerful deputy prime ministers, now seem to be rejoicing in France’s budget problems.Before doing so, they might want to consider that far from reducing the chances that Italy will suffer another round of its sovereign debt crisis, recent French political developments heighten the chances that such an Italian debt crisis might occur sooner rather than later.Luigi di Maio and Matteo Salvini seem to be taking special delight in the fact that Emmanuel Macron, France’s beleaguered president, has had to make very costly budget concessions to pacify the rebellious yellow vest movement and to stop Paris from burning.Those concessions, which include the rolling back of a fuel tax, the increase in the minimum wage and higher pensions for poorer retirees, have put the French budget deficit on a path to reach 3.5 percent of GDP in 2019.Di Maio and Salvini are now pointing out that it would be a double standard for the European Commission to give the French a pass on its excessive budget deficit while throwing the book at Italy for presenting a 2019 budget that did not conform to the European Commission’s demands.

That would be a Whoops.