Quantcast

Italy to balance budget amid financial crisis

By Frances D'emilio

Associated Press

Published: Friday, Aug. 5 2011 1:15 p.m. MDT

A man write on a cardboard, ' Unemployed. Help Me ' as he copies the letters from a note book, in Pamplona northern Spain, Friday Aug. 5, 2011. Spain suffers a giant financial crisis with more than four million people unemployed.

Alvaro Barrientos, Associated Press

ROME — Italy pledged on Friday to work swiftly for a constitutional amendment requiring the government to balance its budget, as Rome feverishly tried to assure domestic and foreign investors its finances are sound and calm nervous markets in Europe.

Premier Silvio Berlusconi told a hastily convened evening news conference the government will "speed up measures" in its budget law approved last month by Parliament, "with the possibility of reaching a balanced budget by 2013 instead of 2014" as first planned.

His conservative government, now more than three years into its five-year term, will also work to amend the Constitution to include a requirement for a balanced budget, Berlusconi said.

Berlusconi, saying he conferred by phone with world leaders, announced that G-7 finance ministers will meet "within days" about the exploding financial crisis. An exact date and venue weren't immediately announced.

Concern over the crisis was trans-Atlantic.

"This evening I'll receive a phone call from President (Barack) Obama" because the crisis "pertains to the global financial panorama," Berlusconi said. German Chancellor Angela Merkel's office also said she would be consulting with Obama later Friday.

Finance Minister Giulio Tremonti, who stood beside Berlusconi, said a balanced budget could be achieved by 2013 by speeding up reform of Italy's extensive, and expensive, social welfare system, which includes national health care and generous retirement payments.

Also key to this goal, Tremonti said, would be what he promised as the "mother of all liberalization," especially in Italy's highly regulated world of labor.

"The principle that all will be allowed unless specifically forbidden" by labor laws will be the guiding principle of the government's strategy, Berlusconi said.

Italy's industrialists and mid-sized employers have complained for decades that Italy's strict laws making firing workers almost impossible discourages them from hiring more employees in moments of need.

Further strategy also includes privatization of sectors, which Tremonti didn't specify, and what he said would be a "speeding up" of investment to improve and modernize infrastructure, as a way to wake up Italy's slumbering economy.

Italy's Parliament went on vacation for a month earlier this week, but on Friday, responding to the quickly worsening economic nervousness, officials of the two chambers said key committees would keep working throughout August.

And all the lawmakers were expected to be summoned back to work as soon as the reforms pushed by Berlusconi is ready for a full vote.

Berlusconi's coalition, despite setbacks this year in local elections, has a comfortable majority in parliament assuming his often fickle ally, the Northern League, closes ranks.

Italy's borrowing costs rose above Spain's for the first time in more than a year, pushing European leaders to interrupt their vacations and look for a response to deepening fears about the health of the eurozone's No. 3 economy.

At the start of Europe's debt crisis 21 months ago, Italy was rarely grouped with the weaker members of the single currency zone, such as Greece, Ireland and Portugal. Many in the markets thought Spain, with its 20 percent unemployment rate, was vulnerable.

But the emergence of Italy as a potential victim over the past few weeks has highlighted just how vulnerable the eurozone is and how insufficient its anti-crisis measures are.

The yield on Italy's 10-year bond stands at 6.09 percent, ahead of Spain's equivalent of 6.04 percent — though both are lower than the euro-era highs earlier in the week and markedly below where they were at the start of the day, they're still not far from the levels that forced Greece, Ireland and Portugal to seek international financial help.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS