Italy: Prime Minister Mario Monti struggles to lower borrowing costs

          The new technocrat prime minister of Italy Mario Monti had his budget plan approved by parliament. At first his appointment soothed markets and lowered Italy's surging borrowing costs but the effect seems to be petering out already.
   Italy faces 69 billion in costs to repay debts early next year. Italian bond yields are again approaching the 7 per cent level. Even though Monti was able to push through a budget package, investors still drove the yield on ten year bonds to 6.91 per cent. At 7 per cent Greece, Ireland, and Portugal all were forced to seek bailout money.
   On Nov. 9 the yield on Italy's 10 year bonds reached a record 7.48 per cent. The appointment of Monti and his strenuous efforts to reduce Italian spending managed to get the rate down to 6.26 per cent on Dec. 6. Now the yields are tending up to the danger level again. Monti told the Senate members: “It is essential that Italians buy government bonds and treasury bills, whose yields are very high. We must trust ourselves.”
   The government is selling many securities before the end of the year including ten year bonds. These will show whether the situation is getting worse. Italy has a debt of 1.9 trillion Euros and a considerable amount must be paid during the first quarter next year.
   Analysts pointed out that the debt crisis is giving Monti the leverage he needs to force structural reforms upon the Italian economy. Monti said that he is focusing his attention on making the labor market less rigid and streamlining the welfare system. Translated this means weakening the power of labor and reducing the social safety net. Analysts also point out that the measures may push Italy into recession. For more see this article.

Italy: Cabinet imposes 32 billion more in cuts

 The cabinet of new Italian prime minister Mario Monti has approved new tax hikes and pension reforms that add up to 32 billion. The measures are designed to restore investor confidence in Italy. Italy's cost of borrowing has skyrocketed of late.
   The cabinet was originally scheduled to meet on Monday but it was moved up to Sunday so that the passage of the measures might have positive effects on markets. The measures still remain to be approved by parliament. Of course the Italian people will have no say on the matter.
   The Northern League the one major party to oppose the new government wants to hold a referendum on pension reform. Interesting that reform now means cutting benefits so that pensioners receive less and must wait longer to receive them.
    Sussana Camusso who heads Italy's biggest union lambasted the new austerity measures claiming that they are  "making money on the backs of poor people in our country". "There is no equity" in the changes.
   Both the IMF and the EU are watching Italy closely and have a team of auditors who are to police implementation of the long promised reforms. No doubt there will be more opposition in the street as the measures come before parliament. For more see this article.

Italy: New Government formed to help solve debt crisis

     A new technocratic government has been formed by former European Commissioner Mario Monti. Monti is himself an economist and technocrat. The government will attempt to bring back Italy from the brink of economic disaster because of its debt. Monti also hopes that the formation of the new government will help calm financial markets.
   The government contains no politicians at all! So much for democracy. This is government of the people by the technocrats for the banks. Corrado Passero who is the CEO of Italy's biggest bank will head the industry and agriculture portfolio.
    An austerity program is to be presented before the Senate later this week. There will probably then be a confidence vote in both houses. The government is expected to have wide support among many parties.
   Recently Italian 10 year bonds have seen interest rates soar to over 7 per cent. This is the level at which Greece and Ireland were forced to seek bailouts.
   Monti wants his government to last until the next scheduled elections in 2013. However, the politicians may not allow him that much time. For more see this article.