The Italian government’s proposed 2019 budget plans triggered a European market decline on Friday, as the deficit spending required risks the financial solvency of the Eurozone. Concerns about a replay of the Greek monetary crisis caused investors to both shift money away from the Euro into other markets and to shift money away from stocks in general.
The trend of shifting money allowed some markets, like the US stock market, to recover most of its related losses as investors used it as a potential safe haven. The day’s trading flat end allowed it to post one of its best quarters in years. Significant concern remains that the EU issue will spawn a contagion situation which will damage all worldwide markets.
At the core of the budgetary concerns is the proposal for a universal basic income for all out-of-work Italians. This demand, pushed simultaneously by junior ministers Matteo Salvini and Luigi Di Maio, is being promised as a way to pull all Italians out of poverty.
The fact that other countries have already attempted UBI experiments and seen them fail catastrophically has not affected Italy’s leaders’ desire for it. The promise of free money to their supporters is an invaluable political tool, but carries risks for those who fail to deliver.
