Italy’s cabinet meets in about two hours and they are expected to decide whether to cancel the VAT tax hike.
Berlusconi’s party is fighting to abolish the hike but Letta has indicated that along with canceling the property tax hike, government tax revenues would suffer too much. Delaying the hike could be an option.
At the same time, there are rumors swirling about an Italian downgrade, even if the debt head has denied them. A delay or cancel of the hike would give plenty of cover to a ratings agency downgrade.
The worries were priced into Italian stocks today as the FTSE MIB fell 1.3%. Elsewhere:
- UK FTSE -0.9%
- German DAX -0.1%
- French CAC -0.1%
- Spain IBEX -0.7%
