Italian Prime Minister Silvio Berlusconi vowed to hasten passage of a 40 billion-euro ($56 billion) deficit-cutting plan to stop a market selloff that threatens Europe’s single currency.
The “crisis prompts us to speed up” approval of the budget cuts, the premier said today in an e-mailed statement, his first public comments on a rout that saw Italian stocks lose almost 7.5 percent over two sessions and bond yields soar to the highest in a decade. Speaking of the austerity plan, Berlusconi pledged “to bolster its content and draw up additional measures aimed at balancing the budget by 2014.”
The government sold 6.75 billion euros of 12-month bills today, its first auction since borrowing costs began soaring amid concern that Italy may follow Greece, Ireland and Portugal in seeking a European Union-led bailout. After the sale, Italian stocks emerged from a bear market, defined as losses of more than 20 percent from a previous high, and yields on 10-year Italian bonds retreated from a euro-era high of 6.02 percent.
“The crisis in confidence that has battered financial markets and hit Italy in recent days is a threat for everyone and that affects the single currency, the most concrete element of European unity,” Berlusconi said. The premier added the country’s banks are “solid” and his government and opposition parties are determined to defend Italy.
The market’s plunge in Italy, the third most-indebted nation in the world, overshadowed talks of the region’s finance chiefs in Brussels on a second package for Greece to follow the 110 billion-euro lifeline it received in May 2010.
Finance Minister Giulio Tremonti left the meeting early today to return to Italy to work on passing his budget-cut plan in parliament. The EU supports Italy’s austerity plan and will “closely monitor the implementation” of the measures, European Economic and Monetary Affairs Commissioner Olli Rehn told reporters after the talks.
The bulk of the budget measures passed by the Cabinet earlier this month won’t be taken until 2013, when general elections are due. Market turmoil has been stoked by investor concern about their implementation and growing tensions between Tremonti and Berlusconi, who last week criticized his finance minister for not being “a team player.”
“Berlusconi and Co. must back down and give Tremonti full support immediately,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. Of all the euro-region countries that are sensitive “to rising debt servicing costs, Italy tops the list, so it can’t afford for this colossal rise in long-term rates to be anything other than very short-term.”
President Giorgio Napolitano yesterday urged the government to seek an agreement with the opposition for a “very quick” approval of the budget plan. The upper house of parliament will vote to approve the package by the end of July 14, Senate President Renato Schifani said in remarks broadcast on Sky TG24.
Italy’s opposition parties will allow the final vote on the budget package in the lower house, or Chamber of Deputies, by Friday in order to have the measures approved before markets open July 18, according to an e-mailed statement.