The Italian spending plan for 2019 could be a boost for nationalist parties in the upcoming European elections, an analyst told CNBC on Monday.
The 2019 budget that the Italian government is due to present in the coming days has kept investors on their toes. There are wide concerns that the populist government will present a budget that will derail the reduction of Italy’s public debt — a critical issue given that Rome holds the second largest pile of debt in Europe.
However, the spending plan could have broader consequences.
“I believe the result from the Italian budget will provide a boost to the nationalists across the bloc heading into next year’s parliamentary elections in May,” Stephen Gallo, European head of forex strategy at Bank of Montreal, told CNBC via email.
“I am already looking towards 2019 and the European parliamentary elections, and for a persistent political risk discount to remain embedded in the euro,” he said. “No matter how the Italian budget negotiations progress from here, my thinking is that Brussels will come out looking worse than it already does.”
National budgets are determined by capitals across Europe, but the European Commission analyzes each individually and rules whether it complies with its fiscal rulebook.