Di Maio Says Italy Doesn’t Want Debt to Spiral Toward 140%

© Bloomberg. Luigi Di Maio Photographer: Alessia Pierdomenico/Bloomberg

(Bloomberg) — Days after his coalition partner roiled markets by threatening to breach European Union fiscal rules, Deputy Prime Minister Luigi Di Maio of the Five Star Movement said Italy’s government wants to rein in the debt load to avoid it spiraling.

“Nobody wants to go over 140%,” Di Maio said during an event in Florence. “Otherwise, the debt-to-GDP level would be out of control.” He added that some investments could be financed by increasing the deficit level provided that it boosts economic output, limiting the debt ratio.

The country’s debt-GDP level was 132.2% at the end of last year.

“I think that 130% is already a lot,” European Commissioner for Economic and Financial Affairs Pierre Moscovici told reporters in Brussels when asked about Italy’s debt.

The yield spread between Italy’s government 10-year bonds and equivalent German bunds narrowed to 278 basis points, after touching the highest since February earlier this week.

Both Five Star and the rightist League of fellow-Deputy Premier Matteo Salvini have at times challenged Brussels over its restrictions on spending, with Di Maio saying earlier this month the limits would be up for discussion after the European elections.

Salvini said Thursday that Italy needs to do what President Donald Trump did in the U.S. on tax cuts, “ignoring all limits, constraints, doubts,” according to remarks quoted by Ansa.

But speaking earlier from Brussels, Finance Minister Giovanni Tria poured water on hits deputy premiers’ comments. “It’s normal that during an election campaign financial markets are particularly reactive, but the facts are what they are and we are committed to meet our targets,”

This week Di Maio seized on the incendiary comments by his partner and sometime rival Salvini to cast his own party as a reasonable, moderate force in the run-up to European parliament elections later this month.

Salvini roiled markets this week saying that Italy should be ready to break EU rules, and that budget regulations in the bloc must be changed.

(Updates with comments from Matteo Salvini in seventh paragraph.)

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