Italy on course for speedy approval of budget

Fears that the eurozone crisis would spread to Italy came to the fore last week when markets became nervous that infighting in Rome would see tough budget decision postponed. Italian prime minister Silvio Berlusconi added to the jitters by openly criticising his finance minister Giulio Tremonti.

The markets responded last Friday with a strong sell-off of Italian stocks, prompting EU council president Herman Van Rompuy to call an emergency meeting of top eurozone officials at the beginning of the week to discuss the eurozone's third largest economy.

An inconclusive meeting of EU finance ministers on Greece on the same day has meant that fears of contagion are still alive. Ajai Chopra, the IMF's official in Ireland, on Thursday said that contagion risks were directly responsible for Ireland's credit rating earlier this week being downgraded to junk status by Moody's rating agency.

The markets are waiting for the EU to reach a deal on a second loan to Greece. Eurozone finance ministers promised swift action at their meeting on Monday but gave no details.

Since then the EU has been vacillating over holding an emergency summit. One is expected to be called only when a deal has been agreed, with much dependent on Germany, which is holding out for the involvement of the private sector.

"A pre-requisite [for the summit] is that we can decide on a ready-made, new programme for Greece," said German chancellor Angela Merkel on Thursday, according to Reuters.

She spoke in favour of a quick agreement but added that it must also be a "reasonable" one.