Irish woes off the agenda as concern grows over Italy
Ireland's two key issues in Europe -- lowering the interest rate on bailout loans and 'burning' some senior bondholders -- will go on the back burner this week as Europe's finance ministers grapple with Greece and newly emerging concerns over Italy.
Top European officials will hold an emergency meeting in Brussels today as concern grows over Italy in particular, which has a large debt burden and low growth prospects.
Reuters reported yesterday that European Council president Herman van Rompuy had called the emergency meeting ahead of a scheduled Eurogroup gathering organised to talk strictly about Greece.
While Finance Minister Michael Noonan will continue to attempt to build alliances on the issue of the bailout loans, this is not on the official agenda and is not regarded as a priority by most of the main players. The issue of bonds in Irish Nationwide and Anglo Irish Bank is also not expected to feature in official discussions.
At the meeting called by Mr Van Rompuy, the slow rate of progress on getting a deal to roll over Greek debt will be top of the agenda. Despite early optimism that banks would sign up for a deal, key negotiators are reporting that everyone involved is "back to square one".
ECB president Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission president Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner.
The talks were organised after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the eurozone after Greece, could be next to suffer in the crisis.
The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs of about 2.45 percentage points on Friday, raising the Italian yield to 5.28pc, close to the 5.5pc-5.7pc area which some bankers think could start putting heavy pressure on Italy's finances.
Shares in Italy's biggest bank, Unicredit Spa, fell 7.9pc on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5pc.
The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also concern that Prime Minister Silvio Berlusconi may be attempting to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit. (Additional reporting by Reuters)