Bloomberg News

Berlusconi Vows Action as EU Urges Italian Economic Overhaul

October 24, 2011

(Updates with no Cabinet decisions in fourth paragraph.)

Oct. 24 (Bloomberg) -- Prime Minister Silvio Berlusconi defended his government’s commitment to fiscal rigor after the European Union urged Italy to pass “comprehensive” measures to fight the debt crisis.

“We are meeting our public-debt obligations on time, we have a primary surplus stronger than our partners’, we will reach a balanced budget in 2013,” Berlusconi said in an e- mailed statement today. “Nobody has anything to fear about Europe’s third-largest economy,” he said, adding that the government was preparing to push through “important decisions” on structural changes.

His comments came before the Cabinet met in Rome to discuss urgent measures as Italy struggles to avoid falling victim to the sovereign-debt crisis. The European Commission earlier today urged “swift adoption followed by rigorous implementation” of economic-growth legislation already under consideration by the government.

Berlusconi’s Cabinet failed to take any decisions at tonight’s meeting amid opposition by the Northern League, a key coalition member, to proposals to raise the retirement age, Sky TG24 reported, citing government sources. The Cabinet may meet again tomorrow, Sky said.

Summit Tension

Berlusconi was put on the defensive at the Brussels summit over the nation’s finances and appointments at the European Central Bank. While French President Nicolas Sarkozy said he had confidence in “Italian authorities as a whole” at a press conference yesterday in Brussels, he declined to answer a follow-up question on whether he had confidence in Berlusconi.

“Nobody in the EU can self-nominate himself commissioner and speak in the name of elected governments,” Berlusconi said in the statement. “Nobody can give lectures to” other EU member states, he said.

The 75-year-old-premier also said that the euro “is the only currency that doesn’t have standing behind it, like the dollar or the pound or the yen, a lender of last resort willing to structurally defend its credibility in the face of aggressive financial markets,” a situation that “must be corrected once and for all.”

The ECB started buying Italian and Spanish debt on Aug. 8 after their borrowing costs soared to euro-era highs amid investor concern that the two nations may succumb to the debt crisis. Spanish and Italian government bonds fell today as Europe’s leaders struggled to convince investors they can craft an effective response to the ordeal.

The yield on Italy’s benchmark 10-year bond climbed 5 basis points to 5.95, pushing the difference with German bunds of equivalent maturity to 383 basis points. That spread reached 400 basis points last week for the first time since Sept. 22.

--Editors: Jeffrey Donovan, Simone Meier

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.


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