Zurich: European Central Bank President Mario Draghi has upped his push for governments to keep their debt in check amid concern over the budget plans in Italy. In his regular policy statement in Frankfurt, Draghi repeated his line on the importance of “rebuilding fiscal buffers”, but added a new comment.
Rather than merely saying that countries would benefit from better policies, he emphasised that there’s a need to fully adhere to European Union budget rules. The comment comes amid worries about the fiscal programme planned by the populist coalition in Draghi’s home country, where bond yields have risen in recent months. Italy’s debt-to-GDP ratio is already above 130 per cent, the second-highest in the euro area.
Italy is due to release the economic framework for the budget by the end of the month and submit its full plan to the EU by mid-October. While the government says it will respect EU rules on budget deficits, some of its promises are costly and could push the debt ratio even higher.
Asked about the potential fallout from the situation in Italy, Draghi said policymakers have so far seen no contagion in other parts of the euro region. He added that once the draft budget law is released, investors will “formulate their view”.