Italy exit from EU budget procedure at risk due to deficit increase, central bank warns - Reuters

Italy’s central bank has warned that the country’s planned exit from the European Union’s excessive deficit procedure could be at risk if its deficit rises further, according to Reuters. The excessive deficit procedure is the EU’s mechanism for pressing member states whose borrowing exceeds agreed limits to bring their budgets back into line. Italy has been working toward leaving that framework, a step that would signal improved fiscal credibility with EU partners and financial markets.

The warning matters because Italy carries one of the largest public debt burdens in the euro area. Any sign that deficit reduction is stalling can influence how investors assess Italian government bonds, and by extension the broader eurozone. Higher deficits generally mean more issuance of debt, which can affect borrowing costs and spreads relative to benchmark eurozone bonds.

What to watch: upcoming Italian budget and deficit figures, the European Commission’s assessments, and any revisions to Italy’s fiscal path. Together, these will indicate whether the exit from the procedure remains on track.