Italy pays less to borrow money as new leader outlines growth plans
REPORTING FROM LONDON -- Italy borrowed money on Thursday at rates lower than it paid last month, bring words of encouragement -- and caution -- from the nation's new leader.
The $3.3-billion sale of 10-year bonds yielded interest rates of about 6.98%, meaning Italy stayed below the threshold it paid lenders last month of over 7%. That stiff cost of borrowing presently is being paid by Greece, Ireland and Portugal, the most indebted members of the 17-nation Eurozone.
The sale followed Italy's encouraging sale of 3-year bonds on Wednesday.
“Yesterday and today the auctions of bonds went rather well," Italian Prime Minister Mario Monti told a news conference Thursday. "It’s encouraging, but we do not consider the financial turbulence to be over.”
“The purchase of Italian bonds by the European Central Bank have recently increased,” he added, “and we can be slightly relieved as there is a tendency for the spread [of the difference between Italian and German bond prices] to decrease.”
Monti, a banker, economics professor and former European Union commissioner who replaced Silvio Berlusconi as premier just six weeks ago, remained upbeat about Italy’s prospects as he outlined his government’s next phase of economic recovery naming it “grow Italy.'
He assured reporters his Cabinet of technocrats, which has a majority support from parliament, would speed up their measures in time for the next EU finance ministers’ meeting on Jan. 23. A tough austerity package designed to confront Italy’s $2.5-billion debt became law last week and includes new property taxes, adjusted pension programs and plans to liberalize employment laws and encourage secure employment openings for young people and women with families.
So far the labor- and pension-related reforms have met with widespread protests and strikes from unions that promise further anti-government action in 2012.
Monti also called for further international efforts, particularly from EU funds, to help those countries deepest in debt. “We need a Europe based on budgetary discipline but not only on that.”
During the 2½-hour news conference, questions ranged from the budget to civil liberties and international relations. Monti stressed that he would not seek to prolong his term of office but told his audience not to believe that his government’s life was “condensed into economic and financial issues.”
There was work to be done on civil justice, “considered one of the principal factors” of Italy’s “competitiveness and attraction,” he said. On foreign issues, there are plans to reactivate Libyan-Italian relations next month.
Monti’s team of technocrats replaced the scandal- and debt-ridden Berlusconi government, which lost credibility after intermittently dominating Italy for 17 years. His Cabinet is accepted by the major political parties as an effective emergency response to the nation’s debt, which is equal to almost 120% of the gross domestic product.
-- Janet Stobart
Photo: Italian Prime Minister Mario Monti pauses during his end of year news conference in Rome on Thursday. Credit: Gabriel Bouys / Agence France-Presse/Getty Images