Eurozone ministers confident of Italy reformTuesday 08 November 2011 12.22
Eurozone finance ministers have said they expect that Italy will implement all of the reform measures specified by Prime Minister Silvio Berlusconi, in order to bring his country's finances under control and ease market turbulance.
The comments were made by the chair of the Eurogroup, Jean Claude Juncker, after talks in Brussels which were dominated by the crisis in Italy resulting in the country's cost of borrowing hitting record levels.
The crisis affecting the eurozone has escalated with significant problems developing in different areas at the same time.
In France, measures were announced to cut €65bn from the budget over the next five years due to a fall-off in growth and the need to protect is credit rating
In Greece, there is still no government after a day of talks although negotiations are scheduled to resume tomorrow.
In Italy, the country's cost of borrowing is heading for unsustainable levels, as the politicial uncertainty continues over the fate of the country's Prime Minister Silvio Berlusconi.
For Eurozone Finance Ministers meeting in Brussels, it's been a torrid day as they attempted to negotiate a means of increasing the size of the EU's bailout fund.
In a bid to restore confidence, Jean Claude Juncker said he expected Italy to implement all promised reforms; Economic's Commissioner, Olli Rehn, declared no study being conducted on how a country could leave the euro zone.
However the problem is that the markets have lost confidence in Italy under Mr Berlusconi and, as it currently stands, the EU does not have a bailout facility which has enough money to protect Italy from a default.
Mr Berlusconi's future is hanging by a thread after Italy's borrowing rates hit a new record this morning.
"Rumours of my resignation are baseless and I do not understand how they started circulating," ANSA news agency quoted Mr Berlusconi as telling his aides after a major supporter, Giuliano Ferrara, said it was "a matter of hours."
Mr Ferrara, a minister in Berlusconi's first government in 1994, said the prime minister was meeting with his family and business associates at his home near Milan.
"That Silvio Berlusconi is about to step down is now clear to everybody, it's a matter of hours, some say minutes," Giuliano Ferrara, the respected editor of the Il Foglio daily, had said in a video posted on the newspaper's website.
However, speaking later, Mr Ferrara seemed to back down, saying a resignation was "the only way out" to avoid "endless political agony."
Last week the Italian government agreed to special surveillance from the International Monetary Fund and the European Union to ensure it was meeting crucial economic targets to cut its massive debt.
The European Commission urged Rome to demonstrate its commitment to budget cuts and confirmed it was sending a monitoring mission to Italy this week to ensure Silvio Berlusconi follows through.
Brussels also sent a questionnaire to Rome asking the government to clarify what "concrete action plans" will be undertaken to reduce Italy's €1.9 trillion public debt.
Silvio Berlusconi's centre-right coalition faces several crucial parliamentary votes in the next few days, and analysts say it appears that he no longer has the 316-seat majority required to continue governing.
Market pressure has been unrelenting, with the yield on Italian 10-year government debt bonds rising to a record 6.54% earlier today.
It is fast approaching the 7% level widely seen as meaning that a country's financing costs are unsustainably high.
Greece, Portugal and Ireland all applied for financial assistance from the EU and the IMF once borrowing costs breached the 7% barrier.
Meanwhile, Minister for Finance Michael Noonan will join his colleagues from the 17-member eurozone in Brussels this afternoon .
Greek Finance Minister Evangelos Venizelos will update his colleagues on the latest developments in Athens, where Prime Minister George Papandreou formally resigned yesterday.
It is expected the financial difficulties in Italy will also be high on the agenda.