Sunday

22nd Jan 2017

Italy denies need for bail-out

  • The 'Monti effect' is fading: investors are sceptical, while political and public support ebbs away (Photo: European Commission)

Italian Prime Minister Mario Monti has said his country does not need a bail-out, even though its borrowing costs have soared amid contagion from Spain, whose recent bail-out has failed to calm markets.

"Italy even in the future will not need aid from the European Financial Stability Fund," Monti said in an interview with the German Public Radio ARD on Tuesday (12 June).

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He called on investors and market analysts "not to be governed by cliches or prejudices" and argued that his country has left its "undisciplined" past behind and is doing more to put its house in order than many other European countries.

He spoke as Italy's borrowing costs went above six percent on Tuesday, while Spain's reached almost seven percent.

The figures indicate that markets are unimpressed by the €100 billion bail-out secured last weekend for its ailing banks.

In a separate press conference that day, Monti refuted claims by Austrian finance minister Maria Fekter that Italy is the next in line for outside rescue.

"I find it completely inappropriate that representatives of other governments in the European Union are talking about the situations of other countries," he said.

Fekter - who is well known for her faux-pas - earlier that day said: "Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that, given the high rates Italy pays to refinance on markets, they too will need support."

She backed down later on, saying she had no information about Rome planning to ask for aid.

Meanwhile, Monti's own political support is weakening.

Late on Tuesday, the technocrat Prime Minister summoned the heads of Italy's biggest political parties to remind them that their backing is crucial for Italy to "overcome the critical nature of the current situation and project an image of cohesion abroad," according to an official statement.

The former EU commissioner was appointed last year to take over the government and initially won EU praise for quickly implementing reforms.

But a deepening recession, high debt and low productivity are putting Italy on the same track as Spain.

Public confidence in Monti is also waning: a poll last week found that his support fell to 34 percent, compared to 71 percent when he took office.

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

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