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Grilli Says Italy Remains Focused as EU Works to Tame Crisis

June 13, 2012

Italy's New Finance Minister Vittorio Grilli

Deputy Italian Finance Minister Vittorio Grilli. Photographer: Victor Sokolowicz/Bloomberg

Italy is focused on meeting its own commitments after Spain became the fourth euro-area nation to seek a bailout with a 100 billion-euro ($124 billion) lifeline for banks, Deputy Finance Minister Vittorio Grilli said.

“The situation in Europe is a complicated” one, Grilli said in an interview at an event in Rome late yesterday. “We, as Italy, are focusing on our own agenda and the good things that we are doing. We have to keep focused on our own commitments.”

Spanish borrowing costs rose to the highest in the history of the euro yesterday, and the yield on Italian 10-year securities jumped to the highest since January before today’s debt sale. Italy, bearer of the region’s second-biggest debt load after Greece, is unlikely to need a bailout as its economy is in a better state than Spain’s, Fitch Ratings Managing Director Ed Parker said in Oslo yesterday.

European governments “are working” to prevent the region’s debt crisis from spreading further, Grilli said, adding that “very important decisions have been taken.”

Grilli also rebuffed concern that investors might see Italy as the next country in the firing line, saying that it’s only “speculation.” Austrian Finance Minister Maria Fekter said yesterday she sees no indication that Italy would request a European Union bailout, one day after saying the country was at risk of needing a rescue.

‘Inappropriate’ Comments

“As I consider inappropriate the comments by the minister on the situation of another member state, I abstain from commenting on such remarks,” Italy’s Prime Minister Mario Monti told reporters in Rome yesterday.

The Rome-based Treasury today sold 6.5 billion euros of one-year bills at 3.972 percent, 1.6 percentage points more than level at the previous auction on May 11. Investors bid for 1.73 times the amount offered, down from 1.79 times last month.

The yield on Italy’s 10-year bond fell 7 basis points to 6.1 percent at 11:05 a.m. in Rome, pushing the difference with German bunds down 15 basis points to 460. A bigger test for the Italian Treasury comes tomorrow when it sells as much as 4.5 billion euros of longer-maturity debt.

Austerity Package

Monti’s government raised taxes on property, gasoline and luxury items such as yachts as part of a 20 billion-euro austerity package passed in December. The plan was aimed at balancing the budget in 2013, a target that was postponed by one year in April as the economy sank deeper into its fourth recession since 2001.

Still, Italy is on track to bring its budget deficit within the European Union limit of 3 percent of gross domestic product this year and the country is already running a surplus before interest payments, meaning its debt will soon peak at about 120 percent of GDP. The budget deficit was 3.9 percent of GDP last year, less than half that of Spain.

The fallout from Monti’s austerity measures, coupled with a forecast of a recession in the single-currency region, will lead the Italian economy to contract around 1.5 percent this year, Bank of Italy Governor Ignazio Visco said May 31.

No Bailout

Italy won’t need a bailout even in the future, Monti told German Public Radio ARD late yesterday.

The Italian spread with German bunds will drop if the European summit at the end of June will approve a “credible package of reforms for growth,” the premier said in Parliament today, adding that Italy is in a better shape now than it was a few months ago. Europe and Italy are in a “particularly intense and crucial phase,” he said.

Monti met last night with Pier Luigi Bersani and Angelino Alfano, the leaders of the Democratic Party and of the People of Liberty party respectively, and with Pierferdinando Casini, head of the Union of Centrists party, to discuss the European economic crisis.

The prime minister outlined the need for political cohesion amid concerns over the “emergency situation caused by the evolution of financial markets,” according to a statement from his office. Monti received “full support” from the three leaders, who pledged to back the government’s reforms that are now in parliament.

“Monti’s pleas to politicians underscore Italy risk is political, and that financial risks are a symptom of this, not a cause,” Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, said by e-mail.

To contact the reporters on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net; Flavia Rotondi in Rome at rotondi@bloomberg.net

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


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