Prime Minister Mario Monti’s Cabinet held “lengthy” discussions on a possible request for the euro-region’s bailout funds to buy Italian bonds and doesn’t expect the country to be subject to additional conditions in return for aid, a government minister said.
“We still have some time to discuss it; we will see what the conditions will be,” Education Minister Francesco Profumo said in an interview today in Rome, when asked whether Italy would make a request in September. “We have a profound understanding and I believe we have the instruments to take decisions.”
In an e-mailed statement issued hours after the interview, Profumo said that “there wasn’t a long discussion” in the Cabinet about making a request to Europe’s anti-spread mechanism and that there was no ongoing discussion at the moment.
Monti had previously said that he didn’t see a need for now to tap the temporary rescue funds.
Italy does not need a Greek-style bailout because the public accounts are in order, Profumo said in the interview. Still, a request for bond buying by the euro-region’s rescue founds would require Italy to agree to conditions before the purchases could begin. Profumo said the government is confident that the euro-region allies would accept the measures already adopted by the government and not require additional austerity.
“In our case, the memorandum of understanding wouldn’t anticipate additional elements,” Profumo said in the interview, referring to the agreement Italy would need to sign in return for the bond buying.
The yield on Italy’s 10-year bond fell 4 basis points to 5.86 percent, the lowest close in a month. That rate is still almost 120 basis points more than on March 9, as Spain’s deepening recession and its request for aid to shore up its banks spread debt crisis contagion to Italy. The difference in yield between Italy’s 10-year debt and comparable German bonds was at 442 basis points today, compared with an average of 271 basis points last year.
Profumo’s remarks come as Germany’s main opposition Social Democrats increased pressure on Chancellor Angela Merkel to accept more burden-sharing to fight the region’s debt crisis. SPD floor leader Frank-Walter Steinmeier said in an interview with Rheinische Post newspaper that Merkel needed to be more frank with the German people about the extent the country is already exposed to the debt crisis through the European Central Bank’s bond buying. He called on Merkel to take more risk in defending the euro.