Brussels, 09/11/2011 (Agence Europe) - The European Commission doubts that the austerity measures adopted in Italy in the summer will achieve the budget objectives set for 2012 and 2013, and its experts have begun an inspection in Rome. In the Commission's questionnaire for the Italian government to glean more information and clarity, which was leaked on the website of Italian newspaper La Repubblica, it explains: “As we estimate that in the current economic context, the planned fiscal strategy will not ensure the achievement of a balanced budget in 2013, additional measures will be needed to achieve the targets for 2012 and 2013. Are contingency measures being prepared already now, and if so, what kind of measures are they? Would they take the form of further expenditure restraint, based on the results of a thorough spending review?” The Commission wants answers by the end of the week.
The announcement that Prime Minister Silvio Berlusconi would be standing down once the reforms (the budget for 2012) have been enacted by parliament, which will open a period of political instability in the country, did not calm fears on the market and the yield on Italian ten-year bonds shot up (see separate article). For the first time, the interest rate demanded is now above 7%, a level deemed to be unsustainable. The bailouts of Ireland and Portugal were triggered when the cost of rolling over their debt for 10 years rose above the 7% mark. Italy needs to borrow nearly €300 billion in 2012 to service its €1.9 trillion debt (120% of GDP). A spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn said on Wednesday 9 November that the commissioner was concerned on Tuesday and was still concerned on Wednesday, but the Commission planned to correct the Italian economy's Achilles' heel - lack of competitiveness. He said that this would go hand-in-hand with budget reforms to encourage growth. (MB/transl.fl)