In Unprecedented Move, EU Rebukes Italy's Budget: Italy Politely Says Screw You


The budget crisis in Italy broke wide open today with a formal, unprecedented rebuke by the EU which Italy dismissed.

The Financial Times reports EU Rejects Italian Budget in Unprecedented Rebuke.

Polite "Screw You"

The EU gave Italy three weeks to submit a new budget. Italy promptly ignored the EU's demand with a firm, but polite "Screw You" message.

> ​Italian leaders said the government would “not give up” on its plans. “We know that, if we were to surrender, we would quickly return to the pro-bank and pro-austerity ‘experts’,” Luigi Di Maio, deputy prime minister and leader of the Five Star Movement, said on Facebook. “And so we will not give up. We know that we are on the right track. And so we will not stop.”

The BBC has additional comments of note in its report Italy budget: European Commission demands changes

> "This is the first Italian budget that the EU doesn't like," wrote Deputy Prime Minister Luigi Di Maio on Facebook. "No surprise: This is the first Italian budget written in Rome and not in Brussels!"

> His co-deputy PM Matteo Salvini added: "This doesn't change anything."

> "They're not attacking a government but a people. These are things that will anger Italians even more," he said.

Big Threat

So far, Italy has downplayed threats of leaving, but did mention them. In contrast, Greece made huge threats and failed to act.

The Greek government never had support of the people to leave the Euro.

Italy doesn't either, at least as of a June 15 Bloomberg article: Italian Support for Euro the Lowest Among Peers.

But with every EU confrontation, support for the Five-Star (M5S) and Lega (LN) coalition rises as shown by the latest polls.

The combined total is nearly 60%. Both parties are Eurosceptic.

The difference between Italy and Greece is huge, not only because of the size of the countries, but also because the populist support.

Upper Hand

Who has the upper hand?

It depends on how far Italy wants to take it. If Italy is willing to leave the Eurozone, then Italy far and away has the upper hand.

In a series of four Tweets, Tom Luongo, @tfl1728, agrees.

Luongo referred to my article "One Size Fits Germany" Math Impossibility, Get Your Money Out of Italy Now!

Here are the key charts.

ECB's One Size Fits Germany

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Target2 Imbalances

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  1. Italy owes creditors, primarily Germany, nearly 500 billion Euros.
  2. The more pressure the EU puts on Italy, the higher Italian bond yields are likely to rise.
  3. The higher Italian bond yields rise, the more likely debt downgrades will come. Moody's currently has Italy just one notch above junk.
  4. If Italy is downgraded to junk, its bonds can no longer be used as collateral for ECB support.
  5. Lega and M5S will blame Brussels and the ECB, and the Italian people will likely buy that story.


This is how one slowly careens towards a Eurozone exit while publicly gaining support for the process.

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  3. "One Size Fits Germany" Math Impossibility, Get Your Money Out of Italy Now!
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Mike "Mish" Shedlock

Comments (3)
No. 1-3

You'll likely see more of this going forward. The rats in Brussels, are positioning themselves to be on the ship least likely to sink post breakup: The German centered one.

Even a smaller EU, comprised of Germany and it's Northern neighbors, plus perhaps France, still holds a lot more opportunity for gravy train passengers to drink Champagne on others' tab, than one consisting of whatever is left if Germans decide they've had enough of the nonsense and leave. Hence, the rats will cozy up to the paying side, rather than risk inciting them to leave.


Hello Mish,

Your blog started showing the best blogs with most comments as first instead of the usual way of showing newest as first.

Maybe you should set the default to newest to all readers since it would make following the newest blogs easier?


Italy should have their own freely floating Lira instead of tied to Germany's economy Euro.

In Lira Italy would have 30%-40% competitiveness boost compared to Euro and as a consequence Italian exports to countries using Euro and even outside Euroa area and even outside Europe would be much more competitive bringing more jobs to Italy, also Italian products would be much more competitive in Italian market against German manufactured products meaning less exports to ITaly for Germany and more produced inside Italy, furthermore Italian made products would be also much more competitive against Chinese manufactured products.

Countries benefiting from Euro: Germany and China. For all other Euro is a negative.

Global Economics