Sunday

4th Dec 2022

Italian bonds shatter 7% bail-out ceiling

  • Italy is facing a twin fiscal and political crisis (Photo: Alessandro Marotta)

The interest rate on Italian 10-year government bonds breached seven percent on Wednesday, shattering the psychological bail-out ‘ceiling’.

Greece, Portugal and Ireland all had to seek multi-billion-euro bail-outs when their 10-year bonds exceeded this threshold.

Read and decide

Join EUobserver today

Become an expert on Europe

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

... or subscribe as a group

The cost of government short-term borrowing for the country exceeds even these levels, with one-year bonds having soared to above eight percent.

The development has EU leaders scrambling to respond to the deterioration of the situation in the markets regarding Italy, as the eurozone's rescue fund is far too small to be able to bail out Italy, Europe's fourth largest economy. Rome owes creditors some €1.9 trillion and needs to roll over debts amounting to more than €300 billion in 2012.

Markets have pummelled Italy in recent days, but even an announcement by Prime Minister Silvio Berlusconi signalling that he will resign has not been sufficient to put an end to the turbulence.

On Tuesday evening, Berlusconi announced he would step down after he failed to win an absolute majority in the Chamber of Deputies earlier in the day.

On Wednesday, the Italian leader, who has been chased by sex scandals and corruption charges throughout his tenure, said that Angelino Alfano, the secretary of his political party, the People of Freedom, is his chosen successor.

Alfano, who served as justice minister from 2008-2010, pushed through a law that delivered immunity from prosecution to the prime minister and three other high-ranking offices. Widely seen as an attempt to save the prime minister from trial, the law was declared unconstitutional by the country’s top court in 2009.

Meanwhile, the Italian president, Giorgio Napolitano, declared that the austerity measures and structural adjustment demanded by core EU powers are to be approved within days.

Napolitano is now in discussions with various political parties aiming to find a solution to the political crisis. Early elections, a new centre-right government involving a shuffling of the current conservative coalition, or a national unity government bringing on board the centre-left opposition are the three options on the table.

"Within a short time, either a new government will be formed which can take any further decisions needed with the support of parliament or parliament will be dissolved and an election campaign will begin within the tightest time-frame," he said.

The European Commission for its part would not be drawn on commenting on the situation, with spokeswoman Pia Ahrenkilde telling reporters on Wednesday: “I have no comment on what is still an internally evolving situation in Italy.”

The EU executive’s economy spokesman, Amadeu Altafaj-Tardio told EUobserver however that core EU powers are not pressing the Italian political class to form a national unity government as it did in Greece. Under heavy pressure from the commission, the ECB, the IMF, Paris and Berlin, the centre-left administration of George Papandreou was decapitated over the weekend.

However, in September, following a downgrade in the country's credit rating by Standard & Poor's. "There is a clear need to build national consensus at the political level but also between social partners [EU jargon for trade unions and employers] to adopt and implement an agenda of growth as a matter of urgency," he said at the time.

A team of commission inspectors however arrived in Italy on Wednesday to monitor the implementation of the government’s new austerity measures and structural adjustment.

Report: Italy to be put under IMF surveillance

Reuters reports that Italy has agreed to be put under surveillance by the International Monetary Fund (IMF) as part of a plan to restore market trust in the eurozone's third-largest economy.

Italian 'national consensus' urgent, says Brussels

The European Commission has called on Italy to build a "national consensus" between political parties and with the unions to assure the implementation of austerity measures and structural adjustment in the wake of a surprise downgrade in the country’s credit rating by Standard & Poor’s.

Monti groomed to be Italy's new PM

In a move that is widely considered to lay the groundwork for a transitional government, Italian President Giorgio Napolitano has appointed Mario Monti senator for life.

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  4. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  5. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  6. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos

Latest News

  1. EU must break Orbán's veto on a tax rate for multinationals
  2. Belarus dictator's family loves EU luxuries, flight data shows
  3. How Berlin and Paris sold-out the EU corporate due diligence law
  4. Turkey's EU-funded detention centres ripe with abuse: NGO
  5. In green subsidy race, EU should not imitate US
  6. EU Commission proposes suspending billions to Hungary
  7. EU: Russian assets to be returned in case of peace treaty
  8. Frontex leadership candidates grilled by MEPs

Stakeholders' Highlights

  1. European Committee of the RegionsRe-Watch EURegions Week 2022
  2. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  3. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  4. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  5. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  6. European Centre for Press and Media FreedomEuropean Anti-SLAPP Conference 2022

Join EUobserver

Support quality EU news

Join us