Either You Give Matteo Salvini €10 Billion In Tax Cuts, Or He Will Implode The Government, Ok?

Matteo Salvini will have his tax cuts, or he will bring down the Italian government.

That, apparently, is the right-wing firebrand’s message to Giuseppe Conte, who, while speaking to reporters on the sidelines of the EU summit in Brussels on Friday, attempted to placate Salvini.

“I am very ambitious, personally very ambitious, perhaps more ambitious than everyone else. I don’t satisfy myself with just lowering an income tax rate, I want a fiscal pact with Italians”, Conte said. “[My approach is] perhaps more advanced, more ambitious than Salvini’s”.

Whatever, Giuseppe. It doesn’t sound like Salvini cares too much about whose plan is more “advanced and ambitious”, but rather about who gets this done expeditiously.

“There are no serious tax cuts that could be worth less than 10 billion euros”, he told Corriere della Sera Friday. “Italy needs a bold tax reform. It’s my duty to see it through [and] if they won’t let me, I’m going to say goodbye and leave.”

In other words, the fractious coalition with Five Star, which was doomed from day one anyway, isn’t going to last unless League’s priorities start getting implemented starting, like, yesterday.

He also says mini-bots or some other “tool” is necessary to pay creditors and Reuters says he’s keen on bringing forward the 2020 budget.

Salvini’s comments came a day after Istat delivered something of a shocker by way of a prediction that Italy’s struggling economy would likely shrink in Q2. That would be a low blow at a time when Rome is already struggling to convince Brussels that Italy has a viable plan to improve the country’s fiscal prospects amid budget disciplinary proceedings which could eventually entail Italy either paying a large fine or else being in violation of EU law.

Read more: EU Officially Comes For Italy

The economy sank into recession in Q4, but rebounded in the first quarter. A return to contraction would bolster the EU’s position that Italy is not on the “right” path.

So far, Brussels hasn’t been impressed with Conte’s efforts to play down budget concerns. With Europe looking for billions in spending cuts and Salvini loudly insisting he won’t allow Italy to be “caged in” by what he has variously described as antiquated and arbitrary fiscal constraints, the premier is largely hapless. Conte is, for all intents and purposes, just a figurehead.

On the bright side, ECB promises of additional accommodation and Mario Draghi’s efforts to further assuage concerns about the central bank’s commitment to supporting the euro-area amid global growth worries and rampant geopolitical uncertainty, have driven a sharp rally in European bonds. Italian yields have come down some 60bp since the start of June. It’s possible that 10-year yields could ultimately retrace the entirety of the blowout from last summer if the global bond rally continues apace.

Meanwhile, Italian stocks are well on their way to erasing a dismal May.

Salvini has alluded to pulling the plug on the coalition on multiple occasions and, thanks to League’s strong showing in the EU elections, he arguably has the political capital he needs to go through with it.

Asked at an event in Rome whether Italy should give the EU fiscal guarantees for 2020, Salvini was unrepentant. “First we provide our citizens with guarantees”, he said. “Then to everyone else”.