3 Aug 2011

Italy’s Berlusconi seeks to calm eurozone crisis

Italian Prime Minister Silvio Berlusconi says eurozone debt problems are caused by a “crisis of faith” in the markets, as he seeks to reassure Europe that Italy is financially solid.

Silvio Berlusconi addressed Italian MPs in a bid to calm fears that Italy could be dragged into a Greek-style financial crisis that could threaten the eurozone.

He insisted that Italy’s political system and its banks were solid.

He said: “It’s clear to absolutely everyone that the problems that have arisen in the past few weeks are a direct consequence of a crisis in faith within international markets…

“Such crises have to be dealt with in a coherent fashion without making the markets nervous – on the contrary, we want to calm them.”

Mr Berlusconi was speaking after yields on Italian and Spanish 10-year bonds reached new highs, topping 6 per cent.

Italy's Silvio Berlusconi insists Italy is financially solid despite market jitters (Getty)

Deep concerns

European Commission President Jose Manuel Barroso said the soaring borrowing costs for both countries were of “deep concern” as Italy’s Finance Minsiter Tremonti scrambled to meet the chairman of eurozone finance ministers, Jean-Claude Juncker, for emergency talks.

It’s clear that the problems are a direct consequence of a crisis in faith within international markets. Silvio Berlusconi

Concerns over Italy’s economic situation follow problems in Greece which also threatened the stability of the single currency. Italy itself was forced into passing a 48bn euro austerity package in record time last month, but that has failed to calm public fears.

While the country has a relatively low budget deficit of 4.6 per cent of national income, its national debt is nearly 120 per cent of GDP, meaning that any rise in borrowing costs could prove dangerous for the country’s economic stability.

Further reforms

Mr Berlusconi told MPs there would be further reforms.

“We know for sure there is still a lot more to do,” he said, listing controlling expenses, spending, and possible interventions on tax and public services.

He pledged to work with unions and employers to reform labour laws and find measures to boost growth, and added: “What’s for sure is that growth is really the essential aim.”