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| EC rejects Italy's budget again – business live | EC rejects Italy's budget again – business live |
| (35 minutes later) | |
| Analyst Emanuele Canegrati of City trading firm BP Prime says the EC’s ruling is blow to Italy (although not an unexpected one...) | |
| @EU_Commission just rejected Italy's 2019 budget law and made the first step to open the procedure for excessive debt. It is the first time in EU history this procedure is opened against a country and according to EU officials it is widely 'justified'. Bad news. @graemewearden | |
| The worst thing to Italy are @VDombrovskis 's words: more austerity has still to come, meaning the country, under the procedure, will have to undertake actions worthing €20B/year to reduce the public debt toward the 60% threshold over the next 5 years. Terrible. @graemewearden | |
| Danske Bank’s Aila Mihr points out that European ministers will have their say next month: | |
| 🇮🇹#European #Commission sees particularly serious non-compliance with #EU rules in #Italy's budget plan, which warrants opening of a debt-based Excessive Deficit Procedure. Next step ECOFIN Council decision on 4 Dec https://t.co/2lrhDfa7WV | |
| The FT’s Mehreen Khan reckons the EC pulled its punches today, and any knock-out blow probably won’t come for some months: | |
| 🇮🇹 EU Commission with a deliberately muted choice of wording today as it recommends a "warranted" excessive deficit procedure for Italy. Doesn't pack a punch in the way previous letters to Rome have. Today will be the start of a long, steady (and probably quite boring) process | |
| EC Vice-President Valdis Dombrovskis has told reporters in Brussels that the Commission had no choice... | |
| “With regret, that today we confirm our assessment that Italy’s draft budget plan is in particularly serious non-compliance with the Council recommendation of 13 July.” | |
| “We conclude that the opening of a procedure for excessive deficit based on the debt is thus warranted.” | |
| European commissioner Pierre Moscovici says the door is still open for Italy to change it budget plans to meet EC rules.... | |
| Our door remains open to dialogue with Italy. As we move closer to opening an Excessive Deficit Procedure, it is even more essential that the Italian authorities engage constructively with the @EU_Commission. | |
| NEWSFLASH: The European Commission has again rejected Italy’s draft budget for 2019. | NEWSFLASH: The European Commission has again rejected Italy’s draft budget for 2019. |
| In an escalation of the row between Brussels and Rome, the EC has ruled that Rome has “seriously violated” debt rules, and will begin disciplinary procedures. | In an escalation of the row between Brussels and Rome, the EC has ruled that Rome has “seriously violated” debt rules, and will begin disciplinary procedures. |
| Italy’s populist government has refused to succumb to pressure to change its deficit target of 2.4% of GDP as it seeks to move forward with election campaign promises, such as introducing a universal basic income, cutting taxes and lowering the retirement age. | Italy’s populist government has refused to succumb to pressure to change its deficit target of 2.4% of GDP as it seeks to move forward with election campaign promises, such as introducing a universal basic income, cutting taxes and lowering the retirement age. |
| In response to the news of disciplinary action, Matteo Salvini, Italy’s deputy prime minister and leader of the far-right League, said: “A letter from the EU? I’m also waiting for one from Father Christmas.” | In response to the news of disciplinary action, Matteo Salvini, Italy’s deputy prime minister and leader of the far-right League, said: “A letter from the EU? I’m also waiting for one from Father Christmas.” |
| More details and reaction to follow... | More details and reaction to follow... |
| Despite October’s rising deficit, the UK government argues that the public finances are on a firmer footing: | Despite October’s rising deficit, the UK government argues that the public finances are on a firmer footing: |
| A HM Treasury spokesperson says: | A HM Treasury spokesperson says: |
| “This is our best year-to-date borrowing performance since 2005, thanks to people’s hard work and the government’s careful management of the public finances | “This is our best year-to-date borrowing performance since 2005, thanks to people’s hard work and the government’s careful management of the public finances |
| Our balanced approach is getting debt falling while supporting our vital public services, keeping taxes low, and investing in Britain’s future.” | Our balanced approach is getting debt falling while supporting our vital public services, keeping taxes low, and investing in Britain’s future.” |
| More retail pain: Furniture group Ikea has said 350 UK jobs are at risk, as part of a shake-up of its global business. | More retail pain: Furniture group Ikea has said 350 UK jobs are at risk, as part of a shake-up of its global business. |
| In total, Ikea is planning to shed 7,500 jobs world wide, as it strives for “a greater focus on adding value to its customers”. | In total, Ikea is planning to shed 7,500 jobs world wide, as it strives for “a greater focus on adding value to its customers”. |
| But....Ikea is also planning to create 11,500 new jobs in the next few years - by opening 30 new “touchpoint” Ikea stores in city centres, and by investing in its digital and logistics operations. | But....Ikea is also planning to create 11,500 new jobs in the next few years - by opening 30 new “touchpoint” Ikea stores in city centres, and by investing in its digital and logistics operations. |
| The OECD has also weighed in on Brexit, by backing Theresa May’s draft withdrawal agreement. | The OECD has also weighed in on Brexit, by backing Theresa May’s draft withdrawal agreement. |
| It has also called for Britain to force “the closest possible relationship” with the EU after the divorce - something Theresa May will be discussing with EC president Juncker tonight. | It has also called for Britain to force “the closest possible relationship” with the EU after the divorce - something Theresa May will be discussing with EC president Juncker tonight. |
| America and China’s trade war has force the OECD thinktank to slash its forecasts for global growth. | America and China’s trade war has force the OECD thinktank to slash its forecasts for global growth. |
| The OECD now believes the world economy will only grow by 3.5% in 2019, down from a previous forecast of 3.7%. Much of the blame is being pinned on the tit-for-tat tariffs on US and Chinese trade, and the threat of more being imposed next year. | The OECD now believes the world economy will only grow by 3.5% in 2019, down from a previous forecast of 3.7%. Much of the blame is being pinned on the tit-for-tat tariffs on US and Chinese trade, and the threat of more being imposed next year. |
| The OECD believes the world economy is now heading for a soft landing, but an escalated trade war could turn it into a hard one. | The OECD believes the world economy is now heading for a soft landing, but an escalated trade war could turn it into a hard one. |
| As Laurence Boone, the OECD’s chief economist, puts it: | As Laurence Boone, the OECD’s chief economist, puts it: |
| “We’re not talking about a plateau [of growth] any more, but a slowdown.” | “We’re not talking about a plateau [of growth] any more, but a slowdown.” |
| Here’s more details: | Here’s more details: |
| On the back of rising trade tensions the prospect of a slowdown in 🇨🇳#China is another risk to #growth, announces #OECD #EconomicOutlook. Read more: https://t.co/EM9Xx5HihA pic.twitter.com/FHDQCe2o4e | On the back of rising trade tensions the prospect of a slowdown in 🇨🇳#China is another risk to #growth, announces #OECD #EconomicOutlook. Read more: https://t.co/EM9Xx5HihA pic.twitter.com/FHDQCe2o4e |
| The impact of actual and threatened tariffs on growth - OECD chart pic.twitter.com/PVBHs6tOvT | The impact of actual and threatened tariffs on growth - OECD chart pic.twitter.com/PVBHs6tOvT |
| Matt Whittaker of the Resolution Foundation has dug into today’s public finances, and shows how the UK is making little impact on its debt mountain: | Matt Whittaker of the Resolution Foundation has dug into today’s public finances, and shows how the UK is making little impact on its debt mountain: |
| On a rolling 12-month basis, borrowing is down to 1.4% of GDP (with the OBR projecting it will fall to 1.2% of GDP by the end of 2018-19) pic.twitter.com/gSuBCKWrqF | On a rolling 12-month basis, borrowing is down to 1.4% of GDP (with the OBR projecting it will fall to 1.2% of GDP by the end of 2018-19) pic.twitter.com/gSuBCKWrqF |
| But while the deficit is no longer the big story (or the government priority) it used to be, the debt-to-GDP ratio remains elevated relative to pre-crisis norms. It is falling, but the deficit projections imply a very slow reduction in debt in the coming years pic.twitter.com/WtINAJYUW7 | But while the deficit is no longer the big story (or the government priority) it used to be, the debt-to-GDP ratio remains elevated relative to pre-crisis norms. It is falling, but the deficit projections imply a very slow reduction in debt in the coming years pic.twitter.com/WtINAJYUW7 |
| The jump in UK borrowing last month may show that the government is, as promised, easing the chains of austerity (a little), as the economy slows. | The jump in UK borrowing last month may show that the government is, as promised, easing the chains of austerity (a little), as the economy slows. |
| John Hawksworth, chief economist at PwC, explains: | John Hawksworth, chief economist at PwC, explains: |
| Public borrowing in October 2018 was £1.6 billion higher than in October 2017, reflecting rapid growth in government spending last month but only a modest rise in tax receipts. | Public borrowing in October 2018 was £1.6 billion higher than in October 2017, reflecting rapid growth in government spending last month but only a modest rise in tax receipts. |
| This is consistent with indications from business surveys and the latest retail sales data that the economy slowed markedly as we moved into the autumn, due in large part to increased uncertainty around Brexit. | This is consistent with indications from business surveys and the latest retail sales data that the economy slowed markedly as we moved into the autumn, due in large part to increased uncertainty around Brexit. |
| The rise in UK borrowing last month will worry chancellor Philip Hammond, says Andrew Wishart of Capital Economics. | The rise in UK borrowing last month will worry chancellor Philip Hammond, says Andrew Wishart of Capital Economics. |
| He writes: | He writes: |
| The first public finances figures released since the Budget bucked the recent trend of improvement. Government borrowing of £8.8bn last month (consensus £6.2bn, CE £7.0bn) was up from £7.2bn in the same month last year and marked the largest October deficit for three years. The increase in borrowing compared to last year was due to a £2.2bn rise in “other” (most likely departmental) spending. This leaves borrowing in the fiscal year to date down by 30% compared to last year. While this is still the lowest since 2005, it is above the OBR’s October Budget forecast for a 36% reduction over the year as a whole. | The first public finances figures released since the Budget bucked the recent trend of improvement. Government borrowing of £8.8bn last month (consensus £6.2bn, CE £7.0bn) was up from £7.2bn in the same month last year and marked the largest October deficit for three years. The increase in borrowing compared to last year was due to a £2.2bn rise in “other” (most likely departmental) spending. This leaves borrowing in the fiscal year to date down by 30% compared to last year. While this is still the lowest since 2005, it is above the OBR’s October Budget forecast for a 36% reduction over the year as a whole. |
| This could be a worrying sign for the Chancellor. If this trend continues, the giveaways in the October Budget could see him breach his near-term fiscal targets. And if there is a no deal Brexit, the resulting economic slowdown would probably cause the public finances to deteriorate further. Admittedly, this could be offset to some extent by the UK not paying part of the financial settlement. | This could be a worrying sign for the Chancellor. If this trend continues, the giveaways in the October Budget could see him breach his near-term fiscal targets. And if there is a no deal Brexit, the resulting economic slowdown would probably cause the public finances to deteriorate further. Admittedly, this could be offset to some extent by the UK not paying part of the financial settlement. |
| Ross Campbell, ICAEW Public Sector Director, points out that Britain’s public finances depend on a good Brexit deal: | Ross Campbell, ICAEW Public Sector Director, points out that Britain’s public finances depend on a good Brexit deal: |
| “In the most recent Budget, the Chancellor pledged further investments into the NHS, roads and schools, and again loosened his target for deficit reduction. It looks like Hammond and May have bet on a positive outcome from Brexit, assuming a deal would be struck and pass parliament. The expectation that a Brexit ‘bounce’ would deliver a spike in business and investment following an agreed deal gave the Chancellor the room to put off the hard decision on putting up taxes. With no clear support in Parliament for the deal, this is a high risk strategy. | “In the most recent Budget, the Chancellor pledged further investments into the NHS, roads and schools, and again loosened his target for deficit reduction. It looks like Hammond and May have bet on a positive outcome from Brexit, assuming a deal would be struck and pass parliament. The expectation that a Brexit ‘bounce’ would deliver a spike in business and investment following an agreed deal gave the Chancellor the room to put off the hard decision on putting up taxes. With no clear support in Parliament for the deal, this is a high risk strategy. |
| “We need to remember that if the Government is not able to get its deal with the EU through parliament then all such bets are off. In his budget speech, the Chancellor admitted as much. If the deal doesn’t get through then even if negotiations continue, it is more than likely that the budget will need to be revisited.” | “We need to remember that if the Government is not able to get its deal with the EU through parliament then all such bets are off. In his budget speech, the Chancellor admitted as much. If the deal doesn’t get through then even if negotiations continue, it is more than likely that the budget will need to be revisited.” |
| Economist Philip Shaw of Investec says the big picture is that UK public finance are improving, despite October’s stumble. | Economist Philip Shaw of Investec says the big picture is that UK public finance are improving, despite October’s stumble. |
| UK govt deficit of £8.8bn in Oct disappointing, but almost offset by a £1.9bn favourable revision over Q3. As chart shows, the story of 2018/19 so far is one of a material improvement in the public finances. pic.twitter.com/hnxLZoIxQQ | UK govt deficit of £8.8bn in Oct disappointing, but almost offset by a £1.9bn favourable revision over Q3. As chart shows, the story of 2018/19 so far is one of a material improvement in the public finances. pic.twitter.com/hnxLZoIxQQ |