Italy's Cabinet Undersecretary Giancarlo Giorgetti
Italy's government should not ignore the problems that soaring government bond yields are causing for Italian banks, including possible capital needs, Cabinet Undersecretary Giancarlo Giorgetti said in a newspaper interview on Sunday.
Giorgetti also told Italian daily Il Messaggero that next year's budget deficit may turn out to be lower than the proposed 2.4 percent of gross domestic output.
The profligate budget plans of Italy's populist government have prompted investors to shed 67 billion euros ($77 billion) of Italian government bonds since May, sending the yield premium Italy pays over safer German paper to more than 3 percentage points.
"The increase in the (bond yield) spread, the amount of public debt banks hold and new European Union banking rules put the industry under pressure and may generate the need to recapitalise the most fragile lenders," said Giorgetti, who is an influential member of the far right League, one of the two parties in Italy's ruling coalition.
Italian banks had been raising capital in recent years to restructure after a deep recession that turned almost a fifth of all bank loans sour.
The clean-up was just beginning to bear fruit when lenders were hit by a spike in Italy's debt costs, which hurts the value of their large sovereign holdings, eating into their capital.
Pummelled by investors, Italian banks' shares trade at a fraction of the value of their assets but the growing uncertainty over Italy's prospects would make it hard for them to raise capital.
"We can't just pretend nothing is happening and ignore these problems," Giorgetti said.
He said the government was made up of "responsible people who would do things responsibly."
After initially rebuffing criticism from Brussels over a sharp deficit increase in the draft 2019 budget, which the European Commission has labelled an "unprecedented" breach of EU fiscal rules, Italy appeared to have softened its stance.
On Saturday, Prime Minister Giuseppe Conte said Rome wanted to establish a "constructive dialogue" with the EU over the budget because it recognised the role of European institutions.
"The 2.4 percent figure is a ceiling for all the various measures included in the budget, but it's not a given that all of them can be implemented because there could be technical difficulties," Giorgetti said.
The coalition comprising the League and the anti-establishment 5-Star Movement wants to boost deficit-spending to lower the retirement age and provide a basic income for the poor. ($1 = 0.8686 euros)
Ryanair has reached a deal with Portuguese pilots on contentious seniority and home base issues, following similar agreements with their counterparts in Britain and Italy this week, the Irish budget airline said on Friday.Ryanair also expects to sign a recognition agreement with the union representing Spanish pilots shortly as it seeks to end a damaging series of strikes that have hurt its business.Ryanair has struggled with labour relations since it bowed to pressure to recognise unions for the first time almost a year ago, contributing to a rare profit warning this month and a warning of worse to come if strikes continue.It said the Portuguese deal - covering issues such as leave allocation and promotion - would allow talks with Portugal's SPAC union on a full collective labour agreement to start by the end of the month.A recognition agreement in Spain will also pave the way for rapid negotiations on a full labour agreement with Spanish pilot union SEPLA, Europe's largest low-cost carrier added.Ryanair signed its first recognition agreement with pilots in its largest market of Britain earlier this year where it has avoided industrial action. Pilots in Italy approved a collective labour agreement in August."These signed agreements with our pilot unions in Portugal, the UK, Italy and shortly in Spain, demonstrate the considerable progress we're making in concluding union agreements with our people in our major EU markets," Ryanair Chief People Officer Eddie Wilson said in a statement."I expect that these agreements in Spain, and Portugal in particular, will encourage the cabin crew unions in both those countries... to quickly conclude cabin crew agreements."Cabin crew in Spain and Portugal took part in a walkout across six European countries last month that disrupted the plans of more than 40,000 passengers in one of Ryanair's worse strikes to date.Two Belgian unions representing Ryanair cabin crew warned of several more days of strikes in Europe before the end of the year if Ryanair does not change its position in negotiations.
Ryanair trumpets progress in relations with European pilots
Italy and the European Union should avoid acting unilaterally in talks about Rome's budget and build trust, Germany's Chancellor Angela Merkel told Italy's Prime Minister Giuseppe Conte in a meeting on Wednesday, according to an Italian official."Merkel lent support to Conte to begin a positive dialogue with European partners on the budget," the source said."Merkel told Conte that at this stage it would be better to foster mutual trust, which is a key condition to favour dialogue," the official added.Italy resisting EU push to impose sanctions over cyberattacks
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