Austrian minister says Italy too may need bailout
Baku, June 13 (AZERTAC). 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 sharp denial on Tuesday from the Italian prime minister. "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," Fekter said. She sought to soften her remarks on Tuesday, saying she had no indication Italy planned to apply for aid. Italian Prime Minister Mario Monti, asked by a German television network whether his country would need a bailout, said: "I don`t believe so." Earlier, he called Fekter`s comments "completely inappropriate" for an EU finance minister. Euro zone officials said they were deeply unhelpful.
A deal by euro zone finance ministers on Saturday to lend Spain up to 100 billion euros (80 billion pounds) to recapitalise its banks was seen by many in the markets as yet another sticking plaster. Spanish 10-year bond government yields soared to 6.81 percent, their highest level since the euro`s launch in 1999. 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.
The market reaction suggests that ministers have failed to break the so-called doom loop between rising government debt, economic recession and teetering banks that previously drove Greece, Ireland and Portugal into EU/IMF bailouts.
European Commission President Jose Manuel Barroso, European Central Bank policymaker Christian Noyer and French Finance Minister Pierre Moscovici all called on Tuesday for swift moves to create a euro zone banking union.
Other news in this section
