REPORTING FROM ROME -- Italian President Giorgio Napolitano, alarmed by at the rapidly deteriorating investor confidence in his country, issued a statement Wednesday saying that there should be “no uncertainty” about the promised resignation of Prime Minister Silvio Berlusconi.
Napolitano said Parliament would approve a package of measures to reduce the government’s heavy debt load “within a few days,” and he suggested that Berlusconi’s departure would come quickly after that.
Furthermore, Napolitano said, fear that Italy’s government will be stuck in a long period of inactivity is “totally unfounded.”
Italy's borrowing costs soared to a new record Wednesday, past the 7% interest rate threshold that analysts say is unsustainable and puts the world’s eighth-largest economy at increasing risk of insolvency and in need of a bailout.
The unexpectedly sharp jump in the Italian 10-year bond yield came despite Berlusconi’s pledge Tuesday that he would resign after the Parliament passed the reform bill, called the stability law.
Analysts had hoped that financial markets would take some comfort from Berlusconi’s promise, given that he had become a focal point for Italy’s troubles and the Eurozone’s debt crisis. But not only was there no rally, stock markets in Europe tumbled, sending Wall Street sharply lower on early trading.
Members of Parliament were said to be scrambling Wednesday to complete a draft of the reform bill. Stefano Fassina, economics spokesman for the main opposition Democratic Party, said the bill would include measures intended to spur growth, such as cutting red tape for businesses and reducing fees to support employment of younger workers.
Fassina said the bill wasn’t likely to contain certain provisions that his party sought, such as taxes on real estate. But because of the financial markets, he said, “we do not have time now to make this fight because the situation is unstable.”
He added: “It’s perfectly clear that the [bond] market is not reacting to fundamentals. They are panicking.”
-- Don Lee
Photo: Italian Prime Minister Silvio Berlusconi after delivering an address to the Senate in Rome on Dec. 13, 2010. Credit: Alberto Pizzoli / AFP/Getty Images