Spain and Italy’s actions highlight that the European authorities may not be able to enforce the stringent budget targets set for those peripheral countries which have been most troubled in recent years.
Portugal, Ireland, and Greece — whose austerity packages took months of painstaking negotiations to complete — may also be able to justify shifting their budget targets after the lack of repercussions for the larger economies.
While the FTSE MIB, the Italian stock market index, fell by around 2 percent on Thursday and bond yields moved slightly higher, the moves were far from the punishing swings of last year.
Ireland is likely to be the next peripheral country to alter its targets, as the country struggles with austerity, according to Megan Greene, senior economist for Western Europe at Roubini Global Economics.
Greene believes that the troika of the International Monetary Fund, European Union and European Central Bank which has bailed out Ireland will demand further austerity measures to make it meet its budget forecasts — and thinks Ireland will eventually need a second bailout.
“Of all these countries who change their forecasts, Ireland is the one who will be really hauled up about it,” she told CNBC.com.
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