Italian Prime Minister Giuseppe Conte came to Russia on an official visit on Wednesday. Conte is the head of Italy’s populist government which was formed after summer elections as a coalition between the anti-establishment “Five Star Movement” and the anti-migration party “Northern League”.
Conte spoke to Russian Prime Minister Dmitry Medvedev in the morning, and later met with President Vladimir Putin.
During the talks, Conte intended to ask Putin for financial assistance, as he had been instructed by Northern League party leader and Deputy Prime Minister Matteo Salvini, sources close to the Italian government told La Stampa.
The Italians hope that Russia will start buying Italian government bonds after the market loses its support from the European Central Bank (ECB).
The ECB, which has been buying Eurozone countries’ government bonds since 2015 as part of a record-setting quantitative easing program, has been de-facto financing the EU’s budget deficit through monetary emissions. In 2017, €80 billion was “printed” on a monthly basis for these purposes, although this had been reduced to €15 billion by October 2018, and is scheduled to stop altogether by January 2019.
Without the ECB’s support, the Italian bonds are losing value rapidly: Whereas two years ago Rome could borrow for 10 years at 1.5% per annum, loans now cost it 3.54%.
The Italian securities are still falling faster than others: the difference in their yield as compared to German bonds has reached a 5-year high.
The Italian government’s plans to increase the budget deficit from 1.8% to 2.4% of the GDP through debt have only added fuel to the fire. At the start of the week, the European Commission refused to approve the project, for the first time in history demanding that a Eurozone country revise the parameters of its state finances.
Moody’s international rating agency lowered Italy’s rating to Baa3, leaving it only one level above “junk” status.
In exchange for the Kremlin’s support, Italy is apparently willing to lobby for an easing of the pressure on Russia. In a press conference before his visit to Moscow, Conte proposed that Russia’s membership in the Group of Eight be restored. He said that the Kremlin has “an important role in all international crises”.