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Italy vows to balance budget early

Italy has pledged to work for a constitutional amendment requiring the government to balance its budget in a bid to reassure domestic and foreign investors that its finances are sound.

At a hastily-convened news conference, finance minister Giulio Tremonti said Italy aims to balance its budget in 2013, a year ahead of schedule.

Premier Silvio Berlusconi announced that G-7 finance ministers will meet "within days" of the exploding financial crisis.

Berlusconi said he was expecting a phone call from US President Barack Obama about the global economic woes.

Italy's borrowing costs rose above Spain's for the first time in more than a year, pushing European leaders to interrupt their holidays and look for a response to deepening fears about the health of the eurozone's third-biggest economy.

At the start of Europe's debt crisis 21 months ago, Italy was rarely grouped with the weaker members of the single currency zone, such as Greece, Ireland and Portugal. Many in the markets thought Spain, with its 20% unemployment rate, was vulnerable.

But the emergence of Italy as a potential victim over the past few weeks has highlighted just how vulnerable the eurozone is and how insufficient its anti-crisis measures are.

The yield on Italy's 10-year bond stands at 6.09 %, ahead of Spain's equivalent of 6.04 % - though both are lower than the euro-era highs earlier in the week and markedly below where they were at the start of the day, they're still not far from the levels that forced Greece, Ireland and Portugal to seek international financial help.

Worries that Italy and Spain maybe next in line led German Chancellor Angela Merkel, who is on holiday in the Italian Alps, and French President Nicolas Sarkozy, on the French Riviera, to take time from their summer holidays for a phone conference on the eurozone crisis. Spanish Prime Minister Jose Luis Rodriguez Zapatero spoke with Mr Sarkozy and Mr Berlusconi in separate phone conversations.

Their options to what a leading EU policymaker described as "incomprehensible" movements in the markets appear limited.


From Belfast Telegraph