Brussels, 28/03/2013 (Agence Europe) - On Thursday 28 March, the money markets, rating agencies and Italy's EU partners were impatiently awaiting the outcome of consultations by the head of the Centre-Left, Pierluigi Bersani, on the constitution of a stable coalition to set up a new government in Italy able to continue with the reforms introduced by the Monti government. Bersani was due to meet with the Italian president, Giorgio Napolitano, in the evening, with some of the Italian media saying he would be confirmed as the head of the new government.
Politically, Bersani has little room for manœuvre. He has to try to form a majority without Silvio Berlusconi's party, the PDL, with which his own party, the PD, will have to come to some agreement to find a successor to President of the Republic Napolitano by the second fortnight of June. And he has to do it without the M55 of Beppe Grillo, which won the greatest number of votes in the last general election, because the M55 categorically refuses any support. The other political parties, including the Northern League and the Greens, have varying demands that Bersani will have to take into account. The political situation appears, then, to be in deadlock, but a government is urgently needed to deal with social and economic matters, which some commentators describe as a time-bomb.
OECD growth forecasts put Italy bottom of the G7 with GDP expected to shrink by 1.6% in the first quarter of 2013 and 1% in the second quarter, after plunging by 3.7% in the third quarter of 2012 compared with the third quarter of the previous year. The European Commission says the Italian productivity shrank by 2.8% in 2012 on 2011, and unemployment has reached 12%. This lack of growth in the economy is causing cash-flow problems for businesses, which are finding it hard to get bank loans. At the same time, the state it endebted to the tune of more than €2 trillion and is having trouble paying its bills - some €40 billion owed to banks and businesses.
The gloomy picture does not hide the fact that a number of corrections have been made and the state is still able to borrow from the money markets at reasonable interest rates. Uncertainty over the formation of a stable government, able to provide the solid guarantees that will allow it to borrow the money needed to keep the state ticking over and stimulate domestic demand and economic growth is undermining credibility, as shown by the recent writedown of Italy debt by the Fitch credit rating agency to BBB+ and the 350 point increase in the spread with the German Bund's interest rate for ten-year bonds (4.73) over the past twenty-four hours. It is hoped that Napolitano's response to the formation of a new government will remove this uncertainty. (FG/transl.fl)