Silvio Berlusconi says Italy banks 'solid and solvent'
- 3 August 2011
- From the section Business
Italian Prime Minister Silvio Berlusconi has said the country will not be drawn into the debt crisis engulfing Europe.
Addressing parliament on Wednesday, he said Italy's banks were "solid and solvent" and the economy was "solid".
His comments come after heavy losses on the Milan stock market and a sharp rise in yields on Italian bonds.
The eurozone's third largest economy is about to introduce a 43bn-euro ($62bn; £38bn) austerity package.
Mr Berlusconi said Italy had "solid economic foundations" and called the recent fall in bond yields a "crisis of faith in the international markets".
Italy has so far managed to avoid sovereign debt problems, despite having one of the highest debt-to-GDP ratios in the eurozone at 120%.
But the economy is twice as big as Greece, Portugal and the Irish Republic's combined, so a bailout would probably be unaffordable.
Mr Berlusconi has been criticised for his silence on Italy's economic problems, amid concerns about whether the government would introduce the full austerity package.
He told MPs that the government would need to approve "as soon as possible" fiscal reforms in order to have "a tax regime that is more favourable for families, workers and businesses".
Mr Berlusconi also underlined the need for labour-market reforms and competition. He said the crisis "should be confronted with consistency and confidence, without bowing to the nervousness of the markets".
But Michael Hewson, an analyst at CMC Markets, doubted whether Mr Berlusconi's speech, made after European stock markets had closed, would calm investors' nerves.
He told the BBC: "This is not about Italy. It is about the future of the euro. As soon as one domino falls, the markets move on to the next one.
"Nor is it about Italy's banks. It's about the government's debt and the only reason the banks are involved is because of their exposure to that debt," he added.
Emma Bonino, vice-president of Italy's Senate and leader of the opposition Radical Party, told the BBC: "For the first time [Mr Berlusconi] said we are facing a crisis - which is something.
"But the real point is the lack of growth - and in the whole 30-minute speech he didn't announce any more measures to promote growth."
Earlier in the day, European Commission President Jose Manuel Barroso described the bond markets' treatment of Italy and Spain as "a cause of deep concern".
Yields on Spanish and Italian bonds have hit euro-era records this week, meaning that it would cost both countries' governments more to borrow money.
The Italian 10-year bond was yielding 6.02%, while the Spanish 10-year bond was at 6.14%.
A bond yield above 6% is considered unsustainable in the long run.
"The upward march in Spanish and Italian bond yields is evidence of the relentlessness of the sovereign debt crisis," said Jane Foley, an analyst at Rabobank International.