Economy Minister Pier Carlo Padoan
said Monday that Italy is shielded from financial market
speculation and other risks to the public debt and financial
picture in the event of a Greek default.
In an interview with newspaper Corriere della Sera, Padoan
said Italy is protected from speculative attacks by instruments
that include the European Central Bank's quantitative easing
(QE) program.
"Speculation would not affect us, if there is an attack,
the ECB has all of the instruments at its disposal to deal with
that," said Padoan.
"We are not in 2011, today our institutions are firmer as
is our economy".
In 2011, Italy was hit hard by a sovereign debt crisis that
drove interest rates sky-high and pushed the country into a
long-running recession from which it is still trying to emerge.
Since then, structural reforms as well as new measures
introduced in the past three years by the ECB have helped to
stabilize the country's economy.
Turmoil followed Greece's decision to reject creditor's
plans, which will likely trigger a default on the country's
Tuesday debt payment and could, in turn, push Athens out of the
eurozone.
Padoan said that Italy does not have "a secret plan" in the
event of a meltdown surrounding Greece, but instead all of these
measures should ensure that borrowing costs for Italy remain
fairly stable.
Still, Italian financial markets endured significant
turmoil Monday, particularly in early trading when at one point,
the spread between Italy's benchmark 10-year bond and its German
counterpart widened above 180 basis points.
That spread is an indication of investor confidence in the
Italy economy compared with what is considered the ultra-safe
German financial market.
The spread calmed by mid-day to below 150 basis points,
closer to last Friday's close of 124 basis points, and the
yield on Italy's 10-year bond stood at 2.28% shortly before
noon.
Later in the day, the spread edged up to 152 basis points
with yields of 2.30% on 10-year paper.
Italy's leading financial market, the FTSE Mib, also opened
sharply lower on Monday and by late afternoon was still 3.28%
below last week's close.
The market was pulled down by Italian bank stocks amid
concerns over Greece - including domestic banks there which the
government closed on Monday for likely a week.
The Athens government also imposed capital controls to halt
massive withdrawals by Greek savers.
Other financial markets around the globe, particularly
European exchanges but also in New York, were rocked by the
breakdown in the Greek negotiations and the possibility of a
'Grexit' from the eurozone.
The ECB was buying government bonds, including Italian BTPs
and German Bunds, on Monday, according to Bloomberg, citing
sources close to the issue.
The agency reported the purchases were in line with what
the ECB has regularly purchased through its QE program.
Analysts polled by Bloomberg said such actions by the ECB
would be critical in the coming days to maintaining the
stability of financial markets.
They added that the ECB is expected to increase the pace
of its bond purchases, through both the QE plan and its Outright
Monetary Transactions (OMT) program.
The latter was announced in September 2012 by ECB President
Mario Draghi to support the currency but has not ever been used.
An emotional European Commission President Jean Claude
Juncker called a news conference on Monday to say that he felt
"betrayed" and "saddened" by what he called Greece's "egotism"
in negotiations over its aid plan that broke down on Friday.
"I am saddened..the good will has evaporated, the
selfishness and tactical games of populists prevailed. I feel
betrayed," said Juncker.
Meanwhile German Chancellor Angela Merkel on Monday warned
that more efforts must be made in talks with Greece.
"If the euro fails, Europe will fail," Merkel said an event
marking the 70th anniversary of Germany's Christian Democratic
Union (CDU) political party.
"Europe must be able to find a compromise," she said.
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