On the markets, the government contract between Movimento 5 Stelle and Lega triggered a "considerable increase" in the spread between Italian government bonds and German Bunds. The European Central Bank notes this in its economic bulletin, adding that this trend has also involved the issues of other eurozone countries. “After showing relatively moderate fluctuations in the first part of the review period, Italian government bond spreads increased considerably after May 15 – we read – when the markets became aware of the details contained in the program proposal put forward by the new government. Conditions in sovereign bond markets have since remained volatile with Italian government bond spreads well above their April levels. The government bond markets of other euro area countries were also affected to varying degrees”. A serious problem but that the league-starred government seems to ignore.
In general, according to the ECB, “Government bond spreads have shown a considerable level of volatility since the second half of May, in a context characterized by political uncertainty in Italy. The fluctuations on the government bond markets have spread in part to other market segments and the volatility on the stock markets has increased”.
RISK STEPS BACK ON PENSION
Furthermore, the ECB warns of the "high risk" that countries such as Italy and Spain take "steps back" on pension reforms. An analysis of theAging Report 2018, from which emerges the risk that “in some countries, for example Italy and Spain, there will be steps backwards with respect to the pension reforms previously adopted. Furthermore, the same risk could increase for countries where, to date, significant falls in replacement rates are expected. In such cases, alternatively, the risk of ever increasing welfare transfers could increase if private pension plans are unable to fill the gap.
DANGER SIGNIFICANT DIVERSION ON ACCOUNTS
Also for this reason, Italy is among the seven countries in the euro area that this year risk a "significant deviation" from the public finance targets envisaged by the EU pacts: "According to the projections of the European Commission, in 2018 most of countries that have not yet achieved a sound budgetary position will fail to meet their commitments under the Stability and Growth Pacts”.
The monetary institution does not hide its criticisms of the application of the rules of the new pact on accounts operated by the Commission, which according to the ECB is "to the detriment of the complete transparency, coherence and predictability of the entire reference framework".
“Among the seven euro area countries which, according to the Commission, risk a significant deviation from the preventive part of the PSC in 2018, four – we read – Belgium, France, Italy and Portugal have debt-to-GDP ratios above 90 per cent ”.
“While, overall, the country-specific recommendations follow the principle that fiscal buffers should be built up in good economic times, the standard approach has some exceptions. The recommendations addressed to Spain and Slovenia for 2019 envisage a lower structural effort than what was agreed on the basis of the matrix of the preventive part of the Pact - we read - i.e. equal to 0,65 per cent instead of 1 per cent of GDP. The deviation from the requirement foreseen by the matrix is based on an economic assessment which refers in particular to high unemployment”.
“This approach – notes the ECB – reflects the 'discretion' adopted in granting a reduction in the adjustment requirements to two countries in 2018: from 0,6 to 0,3 per cent of GDP for Italy and from 1 to 0,6 percent of GDP for Slovenia, in this case with no further room for deviation. Such an application of the Stability and Growth Pact is possible to the detriment of the complete transparency, coherence and predictability of the entire reference framework”.
INFLATION RECOVERY IN JUNE
Meanwhile, in June inflation recorded an increase of 0,3% on a monthly basis and 1,4% on an annual basis (in acceleration compared to +1% in May). This is the preliminary estimate released by Istat which observed: "inflation in June continues to grow in the components linked most to daily consumer purchases".
In fact, the driving force behind the acceleration in the growth of consumer prices are once again "products with a high frequency of purchase, which record an increase in prices on an annual basis more than double the general one, pushing inflation to levels of May 2017”. An inflationary contribution also derives from the prices of services relating to transport, which have shown growing tensions since the beginning of the year
The acceleration of inflation is therefore mainly due to the prices of non-regulated energy goods (from +5,3% in May to +9,4%), both processed food goods (from +1,7% to + 2,4%) and unworked (from +2,4% in May to +3,4%) and to the prices of services relating to transport (from +1,7% to +2,9%).
The prices of food, home and personal care products increased by 0,2% on a monthly basis and by 2,6% on an annual basis (from +1,7% recorded in May).
The prices of frequently purchased products rose by 0,4% in quarterly terms and by 2,9% in trend terms (from +2% in the previous month).
In June there is a boom for the prices of pasta and wine. According to the preliminary estimates released by Istat, for processed food goods, which record growth both in terms of the current situation and in trends (+0,8% and +2,4% respectively), the increases are generalized in the various products of the aggregate : among these, the increases in the prices of Wines from Grapes stand out (+0,7% on a monthly basis and +6,3% on an annual basis, from +5,6% in May) and those of Dried pasta, fresh pasta and preparations of pasta (+2,8% in cyclical terms and +6,6% compared to June last year, from +3,6% in May).
The prices of unprocessed food goods, on the other hand, decreased by 0,9% compared to the previous month and accelerated on an annual basis (from +2,4% observed in May to +3,4% in June); this is mainly explained by the price dynamics of fresh or chilled vegetables other than potatoes, which fell by 2,1% compared to May and recorded a trend reversal on an annual basis (from -1,3% in the previous month to +4,6 .7,7% in June), largely due to the comparison with the month of June last year when the economic downturn was much more marked and amounted to -3%. Among unprocessed food goods, it should be noted that fresh and refrigerated fruit recorded a 8,1% economic decline and a slight deceleration from +7,8% in May to +XNUMX%.
