ROME: The set of data released today is unlikely to tilt the balance of votes in Sunday’s elections. It represents food for thought from Monday onwards, when economic themes will re-gain relevance in the negotiations to form a new government. We expect the labour market theme to take centre stage here, as recent trends in employment creation have been dominated by unpopular fixed-term contracts over the open-ended format.”
“Even more crucially, the post-vote political debate will have to re-focus on fiscal issues. Istat data released yesterday on 2017 annual aggregates was rather comforting: Italy posted a lower than expected 1.9% headline deficit/GDP, which built on a bigger than expected primary surplus of 1.9% of GDP (from 1.5% in 2016). Together with a declining interest rate bill, this helped to bring the debt/GDP ratio down to 131.5% (from 132% in 2016). The decline in the debt/GDP ratio should be safely in the bag and will likely be a key starting point for any future discussion on the Italian fiscal policy stance. After a vocal campaign with eye-catching tax-cut promises, observers will be keenly monitoring whether and how these can be matched with the hard reality of internal and external constraints.
