Italy Remains Under Debt Cost Pressure

Italy's borrowing costs have fallen slightly from recent peaks, but have remained at an unsustainable level close to 7% in the latest auction of 10-year government debt.

The high cost keeps intense pressure on the eurozone's third largest economy as the new Prime Minister Mario Monti attempts to tackle the country's debt crisis.

Mr Monti said Italy had more to do to convince the financial markets it can manage its loans, but he said he was encouraged by the outcome of the latest debt auctions.

"We can be a bit relieved," he said, holding up a graph of recent borrowing costs at a news conference.

But he added: "We absolutely don't consider the market turbulence to be over."

Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7%, and next year alone, Italy has some 330bn euros (?277bn) of debt to refinance.

That means it faces an uphill struggle to convince investors it can avoid a disastrous default that could cause another banking crisis.

"You lose market confidence easily; you get it back with constant and continuous efforts," said Mr Monti, quoting Italy's central bank chief.

The Italian leader, who has been in office for just a month and a half following the resignation of Silvio Berlusconi, said his cabinet was preparing a package of measures to get the Italian economy moving again.

It will include efforts to increase competitiveness and flexibility in Italy's labour market, while cracking down on people who avoid paying property taxes.

Meanwhile, the UK's borrowing costs have continued to slide down - at one point reaching below 1.96% on 10-year bonds - as investors view the debt as relatively safe compared to that held by countries in continental Europe.

Source: http://web.orange.co.uk/article/news/italy_remains_under_debt_cost_pressure

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