Tuesday 17 October 2017

Italy rages over Austrian claim Rome will need rescue package

Comments stoke fears turmoil may last

Austrian Finance Minister Maria Fekter
Austrian Finance Minister Maria Fekter

Michael Shields and Steve Scherer

RAISING the stakes in Europe's debt crisis, Austria's finance minister said Italy may need a financial rescue because of its high borrowing costs, drawing a furious rebuke from the Italian prime minister yesterday.

Austrian finance minister Maria Fekter's assessment of the eurozone's third largest economy stoked fears that Europe is far from ending the last few years of turmoil -- a feeling reinforced by Dutch Finance Minister Jan Kees de Jager, who said the eurozone was "still far from stable".

Eurozone rescue funds, already stretched by supporting Greece, Portugal, Ireland and soon Spain, might be insufficient to cope with Italy as well, Ms Fekter said in a television interview.

"Italy has to work its way out of its economic dilemma of very high deficits and debt, but of course it may be that, given the high rates Italy pays to refinance on markets, they too will need support," she said.

The outspoken finance minister sought to soften her remarks later, saying she had no indication that Italy planned to apply for aid. Italian Prime Minister Mario Monti called her comments "completely inappropriate" for an EU finance minister. Eurozone officials said they were deeply unhelpful.

Contagion

Amid the cacophony, Italian 10-year bond yields also rose further as the aid deal for Spanish banks failed to ease doubts about Madrid's ability to fund itself, fuelling wider contagion fears.

Even though Italy's deficit and unemployment are lower than Spain's and its banks are not exposed to a real estate crisis, doubts about Rome's ability to turn itself around during a deep recession are keeping international investors at bay.

If the economy does not start to grow after a decade of stagnation, Rome will face mounting difficulty in bringing down its debt, now at 120pc of gross domestic product -- second only to Greece's debt mountain in the eurozone.

Ms Fekter's typically outspoken comments came after Italy's industry minister dismissed the idea that Rome may need external help, saying reforms adopted by his government so far had put the Italian economy on a sound footing.

The Austrian minister angered Germany last month by suggesting Greece might be forced out of the EU over its economic problems.

She infuriated Eurogroup chairman Jean-Claude Juncker in March by rushing out to brief the media on a deal to increase the eurozone's financial firewall before he could make the official announcement.

And when US Treasury Secretary Timothy Geithner was invited to a eurozone finance ministers' meeting in Poland last year to plead for a more robust rescue fund, Ms Fekter said bluntly that Washington should look after its own worse fiscal mess first.

Irish Independent

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