Italian Prime Minister Silvio Berlusconi said he alone can deliver the country’s promised deficit cuts as European leaders ramp up demands that his government do its part to combat the region’s debt crisis.
Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013, according to an interview published yesterday in Corriere della Sera. He said the European Central Bank’s support will only be maintained if his administration follows through on the pledged measures.
“Only I and my government can achieve this reform program for 18 months, which is why there is no way for me to stand aside,” the Italian leader told the newspaper.
The European Union’s latest package of measures failed to staunch a rise in Italian borrowing costs, with an Oct. 28 bond sale sending yields to a euro-era record and damping the euphoria unleashed after the summit that ended the day before. Luxembourg Prime Minister Jean-Claude Juncker insisted that Italy should deliver “substantial structural reform.”
“We’re watching very closely,” Juncker said in an interview yesterday on Germany’s ARD. “Italy can’t simply do what suits it, but rather act as we’ve agreed together.”
Italian five-year notes fell, pushing the yield eight basis points higher to 5.83 percent at 8:06 a.m. London time, the highest since the euro was introduced in 1999. On Oct. 28, the Rome-based Treasury sold 3.08 billion euros of 2014 bonds to yield 4.93 percent, the highest since November 2000.
The euro slid 0.9 percent to trade at 1.4020 to the U.S. dollar as of 9:53 a.m. Frankfurt time.
Leaders from the Group of 20 largest economies will convene in Cannes, France, this week after European leaders agreed to bolster the region’s rescue fund to 1 trillion euros ($1.4 trillion), persuaded bondholders to incur 50 percent losses on Greek debt and agreed on a plan shore up banks.
Juncker said that European leaders hadn’t yet delivered a “conclusive answer” to the crisis last week, while German Finance Minister Wolfgang Schaeuble warned in Der Spiegel against inflated expectations.
Berlusconi will present commitments made to European leaders on Nov. 9 and 10, he told Corriere. He also said there was “no deal” with Umberto Bossi, leader of the Northern League party, to resign and hold early elections in return for an agreement to increase the retirement age, as reported on Oct. 26 in newspaper La Repubblica.
European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy wrote to the G-20 “to summarize and explain Europe’s comprehensive crisis response” ahead of their summit in Cannes this week.
“We will implement these measures rigorously and in a timely manner, and we are confident that they will contribute to the swift resolution of the crisis,” according to their letter, issued yesterday. “Whilst we in Europe will play our part, this cannot alone ensure global recovery and rebalanced growth. There is a continued need for joint action by all G-20 partners in a spirit of common responsibility and common purpose.”
European officials began to seek contributions to a prospective fund from countries with bulging reserves such as China, Brazil and Japan. Chinese Vice Finance Minister Zhu Guangyao said Oct. 28 that his government wants more details about the “technicalities” before making any decision on investing in the European Financial Stability Facility.
China as ‘Savior’
China can’t play the role of “savior” to Europe, nor provide a “cure” for the region’s malaise, the official Xinhua news agency said in an English-language commentary. The rescue package announced Oct. 27 is just the start of a long and difficult process to solve Europe’s debt crisis for good and more concerted efforts are needed, the commentary said.
Juncker said the euro area would still be able to resolve the crisis even without investments from countries such as China, even if Chinese participation “makes sense.”
“If China and other investors were not to invest in the end, the decisions that we’ve made are substantial enough alone to master the debt crisis,” Juncker told ARD.
The success of European measures also depends on the Greek debt writedown. Charles Dallara, managing director of the Institute of International Finance and chief negotiator for the lenders, said he’s “very optimistic that more than 90 percent will participate,” he told Welt am Sonntag newspaper yesterday.
Germany’s Schaeuble issued a warning to the banks, saying in Der Spiegel that while the EU prefers a “voluntary” agreement on Greek debt, a “less consensual path is also possible.”