Berlusconi strikes back at French and Germans
ITALIAN leader Silvio Berlusconi was forced to issue a statement last night defending the country's financial discipline after being personally blasted by France and Germany at the European leaders' summit on Sunday.
The yield, or cost of borrowing, on Italy's 10-year government bonds rose to just under 6pc yesterday. Italy's government debt is as big as the size of the country's entire economy. The country needs easy access to the debt market just to roll over bonds as they fall due. At the 6pc level its €2 trillion of debt starts to become unaffordable.
Mr Berlusconi is on the defensive after German chancellor Angela Merkel and French president Nicholas Sarkozy singled out the country over budget failures at the weekend.
Mr Sarkozy was seen to have personalised the issue in comments that were dismissive of his Italian counterpart.
He said he had confidence in "Italian authorities as a whole" at a press conference in Brussels, but would not say if he had confidence in Mr Berlusconi.
Yesterday the Italian premier hit back. "Nobody in the EU can self-nominate himself commissioner and speak in the name of elected governments," Mr Berlusconi said. "Nobody can give lectures to" other EU member states, he added.
"We are meeting our public-debt obligations on time, we have a primary surplus stronger than our partners, we will reach a balanced budget in 2013."
Italy's debt is at the heart of intense efforts to boost the size of rescue funds available in Europe as the size of the debt will quickly overwhelm the €500bn currently available if Italy is forced out of the market and needs a rescue.
The ECB said yesterday that it spent €4.5bn buying Italian and Spanish debts last week.
The action failed to get the bond yield down to safe levels however. Traders said the ECB needed to spend €18bn to €20bn every week just to stabilise the Italian bonds already traded in the markets.
In his statement Mr Berlusconi said: "Nobody has anything to fear about Europe's third-largest economy."