12th Aug 2020

Berlusconi pep talk struggles to persuade markets

  • Rome's troubles are far from over (Photo: Giampaolo Macorig)

Italy's Prime Minister Silvio Berlusconi on Wednesday (3 August) sought to allay market fears, claiming his country's economy is "solid" and "strong", as the borrowing cost for Rome has reached unsustainable levels.

"This is not an Italian crisis, but a planetary one ... We will not follow the nervousness of the markets," Berlusconi pledged in a 35-minute speech to parliament, insisting that Italy had "solid economic foundations" with "solvent" banks and low private debt.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

He delayed his speech by two and a half hours, waiting for the Milan stock exchange to close after a day of heavy losses.

Rome's rising borrowing costs are "excessive" and a reflection of a "crisis of faith in the international markets" Berlusconi went on, after Italian bond yields this week spiked to over 6 percent - a threshold above which they are considered unsustainable in the long run.

Pledging not to step down before the end of his mandate in 2013, Berlusconi said a €70 billion austerity package passed last month and growth-boosting measures of €9 billion in the poorer south approved on Wednesday should give confidence in the Italian economy.

"Our duty as the government is to work for the good of Italy, making the economy take off," he said.

Earlier that day, EU commission chief Jose Manuel Barroso said the spike in borrowing costs for Italy and Spain, whose bond yields also went over the 6 percent threshold "reflect a growing concern among investors about the systemic capacity of the euro area to respond to the evolving crisis."

Barroso said it was imperative for eurozone countries to pass "without delay" the laws necessary to make the EU bailout fund more flexible and allow it to pre-empt contagion to other economies. The deal, agreed last month at a crunch summit in Brussels, has not yet been implemented as most national parliaments have gone into summer recess.

Meanwhile, a British think tank, the Centre for Economics and Business Research, has projected that Rome's heavy debt will lead it to default, while Madrid may just avoid disaster.

In a report published on Thursday, the think-tank calculated that Italy's debt would rise from 128 percent of GDP to 150 percent by 2017 if bond yields stay above the current six percent threshold and growth remains stagnant.

The conditions in Spain are better because its debt would not exceed 75 percent of GDP, even in the worst case scenario.

"Realistically, Italy is bound to default, but Spain may just get away without having to do so," Doug McWilliams from the CEBR said, as quoted by the BBC.


Italy: Is there a way out of the woods?

It’s time to finally bite the bullet or Berlusconi may soon have to add yet another, less than flattering point of note to his CV: bringing down the eurozone, writes Vincenzo Scarpetta.

Berlusconi struggles to implement austerity measures

Italian Prime Minister Silvio Berlusconi on Monday agreed to scrap a controversial wealth tax and to limit the cuts to regional governments, raising questions about the government's ability to implement a €45 billion austerity package.

Top EU officials urge MEPs give quick budget-deal approval

MEPs criticised the EU deal on the budget and recovery package clinched by leaders after five days of gruelling talks, saying it is not enough "future-oriented", and cuts too deeply into EU policies, including health, innovation, defence and humanitarian aid

EU Parliament gears up for fight on budget deal

European parliament president David Sassoli said certain corrections will have to be made in the budget, citing research and the Erasmus program for students, calling the cuts "unjustified".

EU leaders agree corona recovery after epic summit

After gruelling five-day talks, EU leaders agreed on €390bn in grants and €360bn in low-interest loans to hardest-hit member states - after much opposition from the Dutch-led 'frugal' bloc of countries.

EU summit enters fourth day with recovery deadlocked

After bilateral negotiations continued all Sunday night, mostly to try to convince the 'Frugal Four' to move their red lines, European Council president Charles Michel is expected to table a new proposal on Monday afternoon with €390bn in grants.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Join EUobserver

Support quality EU news

Join us