May 14, 2019 / 5:04 PM / a year ago

Italy's Salvini again raps EU budget rules, shrugs off impact on markets

FILE PHOTO: Italy's Prime Minister Giuseppe Conte (L) meets European Commission President Jean-Claude Juncker at his arrival at the European Parliament in Strasbourg, France, February 12, 2019. REUTERS/Vincent Kessler/File Photo

ROME (Reuters) - European Union budget regulations are “starving the continent” and must be changed, Italian Deputy Prime Minister Matteo Salvini said on Wednesday, a day after he roiled financial markets by saying Italy should be ready to break the rules.

Salvini sent markets into a spin after saying on Tuesday that Rome should be willing to break the EU’s deficit ceiling of 3% of gross domestic product and push debt to 140% of GDP if necessary, to lower unemployment.

His right-wing League party is campaigning along with other eurosceptic parties for European Parliament elections on May 26, but his comments are unnerving investors in Italian debt.

“If there are European rules that are starving a continent, these rules must be changed,” Salvini told reporters when asked about his comments on Tuesday, which sent Italy’s 10-year bond yield to a two-month high and pushed the spread between Italian and German yields to their widest level in three months.

On Wednesday, investor fears spread to the Italian share market and rippled through stocks across Europe.

Asked if he was worried that his remarks were widening the spread, he said: “Absolutely not, because Italians’ right to a job, life and health comes first.”

At 132 percent of GDP, Italian debt is proportionally the second-highest in the euro zone after Greece.

Salvini has repeatedly criticised EU rules since becoming League leader in 2013, but his latest attack came at a time of heightened sensitivity to Italian risk due to broader investor nervousness, the proximity of the European Parliament elections and after a lacklustre Italian bond auction on Tuesday.

His remarks also elicited a further show of discord between Italy’s ruling parties, with the League’s coalition partner, the 5-Star Movement, criticising the comments on possibly hiking the debt as “irresponsible”.

Writing by Mark Bendeich; Editing by Gareth Jones and Crispian Balmer

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