ITALIAN PRESIDENT Giorgio Napolitano yesterday appealed for “national cohesion” as the Italian economy came under pressure amid fears the state could become the next victim of the euro zone’s debt crisis.
For the second consecutive trading day, the Italian stock exchange registered a loss, closing down 3.96 per cent, while the much-quoted spread between Italian government bonds and German bonds reached its highest figure since the introduction of the euro, at over three percentage points.
Furthermore, shares in leading Italian banks, Unicredit and Intesa-Sanpaolo, fell by 6.3 per cent and 7.7 per cent respectively.
With the Italian parliament this week due to debate a four-year, €47 billion austerity package, the president’s appeal for cohesion looks like a call for parliament to approve the measure quickly in order to reassure the markets.
That seemed to be the position of German chancellor Angela Merkel who, having discussed the Italian situation with prime minister Silvio Berlusconi on Sunday, said yesterday: “I have every confidence that the Italian government will introduce a budget . . . of saving and consolidation.”
Recently, economic analysts have expressed fears about the Italian economy, the third largest in the euro zone. With almost zero growth, youth unemployment of approximately 30 per cent and national debt close to 120 per cent of GDP, Italy has long looked vulnerable to market speculation.
While the economy’s woes have to be seen against the background of the euro-zone’s debt crisis, in particular that of Greece, there remain concerns that internal Italian political considerations could yet cause further problems.
The embattled prime minister, facing corruption and underage sex charges, increasingly lacks international credibility.
In addition, details of the austerity package remain unclear, with €40 billion of the €47 billion cuts scheduled to take place in 2013 and 2014 – by which time the current government may no longer be in office.
Although the four-year timeline was agreed with the European Commission, it now seems that the package is, in fact, worth €40 billion with €15 billion of that due to be raised by tax-reform legislation that is certain to be bitterly contested.
Further market unease about Italy may well have been prompted by concerns about the position of finance minister Giulio Tremonti. Mr Tremonti seems increasingly at loggerheads with Mr Berlusconi – who last Friday described him as “not a team player”.
The finance minister, seen by the markets as a safe pair of hands on Italian finances, has so far resisted pressure from government partners for vote-winning measures such as tax cuts.
However, Mr Tremonti’s position has been undermined in recent days by the involvement of one of his closest advisors, Marco Milanese, in a corruption scandal.
Last week, the finance minister was forced to leave his central Rome apartment after admitting that it had been his adviser who paid his €8,500 monthly rent. Leftist daily La Repubblicacommented yesterday: "What we need to do is ensure that the political failure of a government that is no longer presentable does not become the bankruptcy of the entire country."
