Italys new economy minister rules out euro exit

Italy’s new economy minister rules out leaving euro

Italy’s new economy minister rules out leaving euro

Italian government bonds have come under concerted selling pressure on fears the government will embark on a spending splurge that Italy can ill-afford and markets are wary that euro-skeptics within the coalition might try to push Italy out of the eurozone.

Tria has also said he and the government aim to reduce Italy's debt/GDP ratio, which is now the eurozone's second-highest at 132 per cent, despite promises to increase welfare spending and roll back pension reforms.

Mr Tria, a little-known economics professor unaffiliated to any party, said the coalition was committed to staying in the euro.

"The position of the executive is clear and unanimous", Tria told Italian newspaper Corriere della Sera in his first major interview since the country's populist government was sworn in at the start of this month.

Traders said Tria's comments sparked short covering, exacerbating the move.

"The government is determined to prevent in any way the market conditions that would lead to an exit materialising. It's not just that we do not want to leave, we will act in such a way that the conditions do not get anywhere near to a position where they might challenge our presence in the euro". "But we do not plan on reviving growth through deficit spending", he said.

The previous center-left government had forecast a fall in debt to 130.8 percent of gross domestic product this year and 128 percent next year against 131.8 percent in 2017.

However, Tria reassured the European Commission that Italy's strategy would be "based on structural reforms" and that Italy would also "make progress on many aspects of the European governance program and banking union". "The range of issues he is talking on raises question marks about the agreed programme between 5-Star and League", he said, referring to the two parties in Italy's coalition.

One of the most radical proposals was the issuance of "mini-BOTs" - securities to pay individuals and companies who are owed money by the state as payment for services or as tax rebates.

"Stop-gap solutions solve nothing", he said.