Euro lead­ers de­mand aus­ter­ity as Italy nears new vote

The Pak Banker - - COMPANIES/BOSS -

Euro­pean lead­ers de­manded that euro mem­bers press on with bud­get cuts to end the debt cri­sis as Italy edged closer to a new elec­tion af­ter an anti-aus­ter­ity vote last week re­sulted in po­lit­i­cal dead­lock. Fi­nance min­is­ters from the 17-mem­ber sin­gle-cur­rency bloc meet in Brus­sels to­day to dis­cuss is­sues in­clud­ing a bailout for Cyprus.

“Now in Europe, af­ter the Ital­ian elec­tion, it seems to be a case of ei­ther aus­ter­ity and sav­ings pro­grams or growth, but that’s a com­pletely false premise,” Ger­man Chan­cel­lor An­gela Merkel said at March 1 event. An Ital­ian na­tional flag flies from a mon­u­ment in Gen­zano, Italy. Ital­ian po­lit­i­cal in­sta­bil­ity, af­ter last week’s elec­tion ended in a four-way split, threat­ens to reignite con­cern about the deep­en­ing of the debt cri­sis.

“Now in Europe, af­ter the Ital­ian elec­tion, it seems to be a case of ei­ther aus­ter­ity and sav­ings pro­grams or growth, but that’s a com­pletely false premise,” Ger­man Chan­cel­lor An­gela Merkel said at March 1 event. EU Eco­nomic and Mon­e­tary Af­fairs Com­mis­sioner Olli Rehn echoed those com­ments this week­end, telling Ger­many’s Der Spiegel mag­a­zine that there’s no scope for the bloc to let up on bud­get dis­ci­pline. Ital­ian po­lit­i­cal in­sta­bil­ity, af­ter last week’s elec­tion ended in a four-way split, threat­ens to reignite con­cern about the deep­en­ing of the debt cri­sis. Vot­ers in the bloc’s third­largest econ­omy re­volted against Ger­man-in­spired aus­ter­ity mea­sures, hand­ing the party of co­me­di­anturned-politi­cian Beppe Grillo more than 25 per­cent of the vote with its anti-spend­ing cut mes­sage and a call for a ref­er­en­dum on euro mem­ber­ship. Ital­ian 10-year bond yields climbed to a three-month high last week, jump­ing 34 ba­sis points to 4.79 per­cent. Yields rose 6 ba­sis points to 4.84 per­cent as of 10 a.m. in Berlin. Still, Span­ish bonds ral­lied last week along with Greek and Por­tuguese se­cu­ri­ties on spec­u­la­tion that the Euro­pean Cen­tral Bank, which eased a mar­ket panic last year with a pledge to buy sov­er­eign debt, will main­tain con­trol over the three­year-old debt cri­sis.

Any “sig­nif­i­cant” at­tempt to un­ravel Prime Min­is­ter Mario Monti’s re­forms would risk “se­ri­ous tur­moil across Europe,” Hol­ger Sch­mied­ing, chief econ­o­mist at Beren­berg Bank in Lon­don, said in a note to­day. “Our base case re­mains that Brus­sels, Frankfurt and Berlin jointly with the bond vig­i­lantes will sim­ply leave Italy no choice but to stay on the straight and nar­row — or at least to not go astray for very long.”

Ital­ian Pres­i­dent Gior­gio Napoli­tano told po­lit­i­cal lead­ers March 2 to put pub­lic in­ter­est and the coun­try’s in­ter­na­tional rep­u­ta­tion first as Grillo re­it­er­ated that his party, the 5 Star Move­ment, won’t back any government. Ber­sani, whose fac­tion won the most votes, is re­sist­ing co­op­er­a­tion with former pre­mier Sil­vio Ber­lus­coni or Grillo’s up­start move­ment.

“We have 460 par­lia­men­tar­i­ans, dou­ble what the right got and triple what Grillo won,” Ber­sani said in an in­ter­view last night on state-owned RAI3 tele­vi­sion’s “Che Tempo Che Fa” pro­gram. “So we will have the first word.”

Italy may hold new elec­tions this year if Ber­sani and his Demo­cratic Party fail to find enough back­ing in par­lia­ment to form a government, Ste­fano Fassina, the group’s eco­nomic pol­icy spokesman, told Sky TG24 TV yes­ter­day.

There are no other al­ter­na­tives than to hold a new vote “in a few months” should Ber­sani fail to find a ma­jor­ity, he said. “We should name a new pres­i­dent, change the elec­toral law and then re­turn to polls as soon as pos­si­ble.”

The elec­tion showed vot­ers re­jected Monti’s aus­ter­ity poli­cies and that a new tech­no­cratic government isn’t the an­swer, Fassina said. The euro area isn’t on the right path to end the debt cri­sis, he said.

Merkel, speak­ing three days ago at an event held by her Chris­tian Demo­cratic Union in Greif­swald on Ger­many’s Baltic coast, urged Italy not to stray from re­forms, say­ing that her stance on deficits is “not about lik­ing to whip peo­ple.”

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.