Italy's populist government has lowered its 2019 budget deficit target to 2.04% of economic output in a bid to comply with European Union's rules and avoid sanctions for failing to rein in debt, according to Bloomberg. 

The new budget deficit target is considerably lower than the 2.4% projected in April's draft budget. 

The deficit is expected to fall by €7.6 billion ($8.6 billion) this year, courtesy of higher revenues and lower spending, including €1.5 billion previously set aside for social programs in which demand has been lower than expected, the Finance Ministry said in a statement on Monday. 

As a result, Italy's structural deficit (excludes temporary measures and effects that the EU uses to assess a country’s fiscal discipline) is seen improving by 0.3 percentage points in 2019, compared to the previous projection of 0.2 percentage points deterioration. 

With Italy complying with the EU rules, the nation's bond yields may drop today, possibly helping the EUR stay bid. 

 

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