Bloomberg News

Market Nervousness About Italy Not Justified, Schaeuble Says

November 07, 2011

(Adds comments on Italy, Greece starting in second paragraph.)

Nov. 7 (Bloomberg) -- Investor nervousness about Italy isn’t justified, German Finance Minister Wolfgang Schaeuble said as yields on Italian government debt climbed to euro-era records.

“Italy is not in a comparable situation” to Greece, Schaeuble told reporters before a meeting of euro-area finance ministers in Brussels today. “Italy has made a binding announcement on a range of measures which, when they’re implemented, can help restore confidence in markets. Italy’s real figures don’t justify this nervousness in markets.”

Schaeuble also sought “binding” assurances that the next Greek government will stay the austerity course, adding that Europe has time before deciding on the payout of Greece’s next loan installment.

Schaeuble spoke as European finance chiefs returned to Brussels today on a mission to convince global leaders that they can shield countries such as Italy and Spain from the spreading debt crisis by bulking up their bailout fund.

The talks come after Greek premier George Papandreou agreed to step down to make way for a national unity government. In Italy, Prime Minister Silvio Berlusconi faces pressure to quit as his majority unraveled before a key parliamentary vote tomorrow. He repeated that he plans to stay on through 2013.

The yield on the benchmark 10-year bond is now close to the 7 percent level that drove Greece, Ireland and Portugal to seek bailouts. It climbed 29 basis points to 6.63 percent at 4:36 p.m. London time.

Vulnerable

With almost 1.6 trillion euros ($2.2 trillion) of bonds outstanding, Italy has more liabilities than Spain, Portugal and Ireland combined, making it vulnerable to increases in borrowing costs. Berlusconi triggered the latest surge in yields after bowing to domestic demands to water down a 45.5 billion-euro austerity package.

In Greece, Papandreou spoke to the main opposition leader, Antonis Samaras, today as they sought to work out details of a unity government to implement a second Greek financing package of 130 billion euros before leading the country to elections. Lucas Papademos, former European Central Bank vice president, will head an interim government, To Vima newspaper reported, without citing anyone.

“Greece has to make sure that everything that has been agreed can actually be implemented by Greece,” Schaeuble said. “In the current situation it will be important that not just the government and the political forces behind it, but also the opposition assures in a binding fashion that they stick to the agreements.”

--Editors: Andrew Atkinson, Patrick Henry

To contact the reporters on this story: Stephanie Bodoni in Brussels at sbodoni@bloomberg.net; James G. Neuger at jneuger@bloomberg.net; Rainer Buergin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net


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