Brussels, 11/07/2011 (Agence Europe) - The Chancellor Germany, Angela Merkel, has been on the telephone to the Italian prime minister, Silvio Berlusconi, to insist that the rapid endorsement by the Italian parliament of all the government's austerity measures will send an important signal for the security of the eurozone. The Italian president, Giorgio Napolitano, has called for “national cohesion”, a message heeded by the opposition, which will not put up obstacles to prevent parliament from introducing the austerity plan before the summer break.
Merkel's telephone call to Berlusconi and Napolitano's appeal for national cohesion both took place on Monday 11 July and have been interpreted by a number of observers as showing signs of growing concern among Europe's leaders, although German economics minster, Wolfgang Schauble, says that Italy “is not a problem”. In Brussels for a Eurogroup meeting, Italy's economics minister, Giulio Tremonti (who has just been appointed as coordinator of his EPP colleagues, replacing Jyrki Katainen of Finland who is now the new Finnish prime minister), met with the new French finance minster, François Baroin, in the latter's first trip abroad as finance minister.
Tremonti says the package of financial austerity measures might even get approved later this week, which would send out a strong message. On 30 June, the Italian government adopted a €40 billion austerity plan to reassure the financial markets because the country's debt has now reached 120% of GDP in a period of low growth (0.1% in the first quarter of the year). However, doubts remain about the plan's actual implementation, which is intended to enable Italy to achieve close to a balanced budget in 2014, as most of the measures are for 2013 and 2014 and would therefore come under the responsibility of a new government because the current government's term of office ends in the spring of 2013.
After a Black Friday when Italian bond rates hit record highs and the Milan Stock Exchange fell sharply, concern was palpable in Rome and Milan. There were rumours on Sunday of a special meeting in Brussels to discuss Italy's finances, but the rumours were soon quashed because they referred to no more than the normal weekly meeting between the president of the European Council, Herman Van Rompuy, and the president of the European Commission, José Manuel Barroso, along with a few other figures ahead of the Eurogroup meeting, rather than to discuss Italy as such. The markets are concerned about the possible spread of the financial crisis to Italy because such an eventuality would hit the euro. Italy is the eurozone's third-largest economy and economists interviewed in international media say the country's strengths will prevent any Greek-type scenario. The Polish chair of the ECOFIN Council, Poland's finance minister Jacek Rostowski, does not believe there is any danger because “Italy's budget situation seems to be well controlled” - a view shared by Dutch finance minister, Jan Kees De Jaeger. In the early afternoon of Monday, however, interest rates for rolling over Italian debt were still on the rise and the stock exchange had fallen by more than 3% despite the introduction of new rules to reduce speculation by restricting short-selling. (Gp/transl.fl)