Berlusconi to accelerate austerity plan as Italian crisis escalates

PRIME Minister Silvio Berlusconi agreed yesterday to accelerate plans to restore Italy’s public finances after a day of hectic telephoning with international partners alarmed at the escalating crisis over Italian debt.

Speaking at a hastily called news conference after markets closed, Berlusconi promised to bring forward austerity measures passed last month and get the budget into balance by 2013, a year ahead of the original schedule.

“We consider it appropriate to introduce an acceleration of the measures which we introduced recently in the fiscal planning law to give us the possibility of reaching our objective of balancing the budget early, by 2013 instead of 2014,” he said.

With Economy Minister Giulio Tremonti sitting alongside, he said the government would introduce a constitutional balanced budget amendment and accelerate unspecified tax measures to help cut the deficit. Tremonti said there would also be labour reforms.

“There is a very particular attention from international speculation on us that we must try to counter,” Berlusconi said.

Berlusconi, saying he conferred by phone with world leaders, also announced that G-7 finance ministers will meet “within days” about the exploding financial crisis.

Later, his spokesman clarified that convening an “extraordinary meeting” of the G-7 finance ministers was still “at the reflection stage” with no decision yet taken, although Italy favoured one.

The moves followed criticism that Italy had failed to act decisively enough to halt a market emergency that has threatened to engulf the entire eurozone and triggered near-panic on financial markets.

Italian 10-year bond yields have risen over 6% and the spread over benchmark German Bunds briefly went past the equivalent spread between Spanish and German debt yesterday, indicating that investors saw Italy as riskier than Spain.

Earlier yesterday, sources told Reuters the ECB had agreed in principle to buy Italian bonds on secondary markets as early as next week on the condition it brought forward key structural reforms.

Italy has been in the crosshairs of bond markets since early July as doubts have grown about the sustainability of its public debt and the ability of its fractious government to adopt deep reforms needed to revive its chronically weak growth.

A €48bn austerity plan passed in parliament last month has been widely criticised for delaying most cuts until after elections in 2013.

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