Monti orders poverty-stricken Sicily to cut spending
ITALIAN Prime Minister Mario Monti, faced with a surge in borrowing costs, told Sicily yesterday to cut spending and said the national government will oversee changes to the island's public administration.
Mr Monti and outgoing Sicilian Governor Raffaele Lombardo met in Rome and agreed on "a plan for financial recovery and reorganisation of the regional public administration". The changes will be "constantly monitored by the technical institutions of the national government", Mr Monti said
Mr Monti is seeking to assure investors he can enforce budget discipline and reduce the country's €1.9trn debt load.
Sicily, the poorest of Italy's 20 regions, was reprimanded by Italy's state auditor in a June 29 report that cited a "notable, worrying deterioration" in the region's 2011 accounts. Mr Lombardo is to step down on July 31.
Mr Monti pressed Mr Lombardo to resign in a July 18 letter, in which the premier said he recognised "serious concerns about the possibility Sicily could default". Piero Gnudi, Mr Monti's minister for regional affairs, will monitor Sicily's reorganisation for the government.
Mr Monti approved €400m of funds for Sicily, which faced a liquidity shortage. Mr Lombardo said yesterday that Sicily will get another €240m from the government for healthcare.
"Sicily has a solid budget and sustainable finances," Mr Lombardo said after meeting Mr Monti.
Sicily deputy governor Massimo Russo will take Mr Lombardo's responsibilities on an interim basis after the governor resigns.
The yield on Italy's 10-year bond rose 24 basis points to 6.56pc yesterday, pushing the difference with similar-maturity German bunds to the highest since Mr Monti took power on November 16.
That risk premium widened to 532bps, exceeding the January 9 closing high under Mr Monti. It compares to a euro- era closing high on November 9 of 552bps. It reached 572bps earlier in the day.
"I remember that date very well, because I was in Berlin and got a call from the head of state," Mr Monti said in Rome at a December 29 year-end press conference. He was commenting on a November call from President Giorgio Napolitano.
On November 13, the president asked Mr Monti to form a new government. He was sworn in three days later to succeed Silvio Berlusconi. Italy's public debt rose in the first quarter to 123.3pc of GDP, up from 120.1pc at the end of 2011.