December 4, 2021

Berlusconi Pledges to Push Through Austerity Bill

In his first statement since Friday, when he had disparaged his finance minister, Giulio Tremonti, in a newspaper interview, Mr. Berlusconi said the government was “stable and strong, the majority cohesive and determined” to pass the bill. It calls for €40 billion, or $56 billion, in tax increases and cuts to the public sector.

Italian Senate leaders said they would speed discussion of the bill for approval as early as Thursday, allowing it to pass directly to the lower house. Mr. Tremonti is expected to meet on Wednesday with senators from the government and center-left opposition to discuss the budget bill.

Mr. Tremonti is held up by many investors as being instrumental to Italy’s bid for market credibility. Comments last week by Mr. Berlusconi that he may be on the way out led investors to flee Italian debt, sending yields soaring.

The interest on its 10-year bond rose to nearly 6 percent Tuesday morning, but fell back to 5.56 percent, a decline from Monday, after Mr. Tremonti returned to Rome early from a meeting of euro zone officials to take charge of discussions on the austerity measures, and the government successfully sold one-year Treasury bills.

In a country where the term “austerity” has only entered the national conversation recently and where the government’s rhetoric has often been a remove from economic reality, Mr. Berlusconi’s statement was notable for its tone as well as its contents.

While underlining the strengths of Italy’s economy, Mr. Berlusconi for the first time acknowledged that “for us, for Italy, this moment is certainly not easy.”

“We need to be united and cohesive in our common interest, aware that the efforts and sacrifices made in the short-term will result in permanent and secure gains,” he added.

He said that the “crisis of confidence” had hit not only Italy but also the common currency itself.

“We have Europe by our side and we can count on undeniable points of strength,” Mr. Berlusconi said.

In recent days, the prime minister has been conspicuously absent from television, the medium through which he normally communicates, in a sign that as his era draws to a close, he may now be seen as a liability to Italy’s international credibility.

Mr. Berlusconi also has not appeared with Mr. Tremonti, indicating to some analysts that the tensions within the governing coalition have only been covered temporarily in an effort to pass the budget, but are still boiling beneath the surface.

Despite Italy’s high public debt, low growth and political instability, economists said Italy was objectively in better shape than Greece, Spain, Portugal and Ireland because it did not have a housing bubble, its budget deficit is relatively small compared with the size of its economy, and the majority of its debt is held domestically.

But the worries about Italy have further shaken already fragile global market sentiment. Asian and European stocks fell Tuesday and the euro was also down, although markets in Europe recovered ground during the day, and the market index in Milan rose.

Alessandro Frigerio, a fund manager at RMJ Sgr in Milan, likened market movements to a game of pinball.

“It’s not usual to see a 1,000-point one-day comeback in Italian stocks,” he said. “It’s hard to say what’s going to happen when the ball bounces off the flipper and into the corner.”

One measure of the sharp swing in mood, Mr. Frigerio noted, was the shares of UniCredit, a major Italian bank: They were down by their daily limit of more than 7 percent before turning around to close with a 5.9 percent gain. In the same period, the spread between Italian and German 10-year bonds widened to 3.75 percentage points before shrinking to 2.85 points.

The recovery might have been related to market speculation that the European Central Bank had been buying the bonds of Italy and other countries that have come under pressure.

“I can’t say whether the E.C.B. was buying or not,” Mr. Frigerio said. “What matters, for the speculators, is what you think happened.”

David Jolly reported from Paris.

Article source: http://www.nytimes.com/2011/07/13/business/global/berlusconi-pledges-to-push-through-austerity-bill.html?partner=rss&emc=rss