By Jan Strupczewski BRUSSELS (Reuters) – Italy’s emerging ruling coalition is likely to put deeper euro zone integration on hold and could set the stage for the bloc’s next crisis if it delivers on its tax-cutting and high-spending policies, European policymakers and economists fear. Italy’s anti-establishment 5-Star Movement and the far-right League are nearing a government coalition deal that would bring together two parties which both want to challenge European Union limits on government borrowing and spending. EU rules limit government budget deficits to 3 percent of gross domestic product and debt to 60 percent of GDP and oblige governments to seek balanced budgets. With debt of around 132 percent of GDP and slow economic growth, Italy has long been a worry for euro zone policy-makers. “With the M5S/LN government, the underlying problems of the Italian economy, including low growth, inflexible labour markets, inefficient banking system and public administration will not be tackled, in many cases only worsened,” Nordea Chief Strategist Jan von Gerich said in a note to clients. “In short, trust towards Italy is bound to face heavy tests under a M5S/LN government, even if the two parties will not be able to implement their programme in full,”… Read full this story
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