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Rome - Italian Prime Minister Silvio Berlusconi is to speak
to parliament on Wednesday to try to calm fears over escalating market turmoil
that has brought Italy to the edge of a Greek-style financial crisis.
With yields on Italian 10-year bonds at over 6%, a level
largely seen as unsustainable, the premium that investors demand to hold
Italian bonds over benchmark German debt were around euro lifetime highs at 386
points.
Italian bank stocks, which have been pounded in recent days,
opened lower, continuing a slide that has seen shares in the two biggest banks
drop more than 20% since the start of July. The main Milan stock market index
was down at a 27-month low.
On Tuesday, Italian finance officials held an emergency
meeting after concerns over Italy's public debt sent borrowing costs to record
levels. They issued a statement afterwards saying that the financial system was
solid.
Berlusconi, who has been largely silent over the past weeks,
is due to address the lower house and the senate but it is not clear whether
he will have any significant new measures.
On Tuesday, yields on Spanish and Italian five-year bonds
briefly reached parity for the first time since March 2010, a concrete sign
markets were beginning to regard Italy in the same way as debt strugglers
Spain, Portugal or Greece.
However Italy's economy would be far too big for the kind of
assistance European authorities have offered to prop up Greece and Ireland, and
the turbulence has caused alarm across the eurozone and beyond.
Measures
Italian newspapers said that Berlusconi may announce some
smaller moves to reassure Italian voters, including some minor tax changes or
easing of extra healthcare costs.
There was also some speculation that he may bring forward
some measures already announced in the €48bn austerity package passed in parliament last month to bring Italy's budget into balance by 2014.
"The most urgent measure, as has been stressed on a
number of times in these pages, is bringing forward moves to balance the
budget," Italy's leading daily, the Corriere della Sera, said in a
front-page editorial.
Despite being passed with unprecedented speed with the
cooperation of the centre-left opposition, the austerity package has been
criticised for holding back the bulk of cuts until 2013, after the scheduled
date for new elections.
Despite a public debt equivalent to 120% of gross domestic
product, Italy has until recently stood apart from the eurozone crisis thanks
to a relatively modest budget deficit, high private savings and a conservative
financial system.
However, concerns about the struggling centre-right
government's ability to revive Italy's stagnant economy following warnings from
credit ratings agencies have changed perceptions markedly in recent weeks.
Uncertainty over the position of Economy Minister Giulio
Tremonti, who has appeared estranged from Berlusconi and has been weakened by a
scandal affecting a close former aide, has also unsettled investors who have
long seen him as an anchor of stability.
