Italy sought European political support yesterday as its stocks and bonds gained some respite from a selloff triggered by the eurozone’s unresolved debt crisis and fears of a global economic slowdown.
Italian Economy Minister Giulio Tremonti met the chairman of eurozone finance ministers, Jean-Claude Juncker, for emergency talks after yields on Italian and Spanish 10-year bonds flirted with 14-year highs before calming a little.
They made no policy announcements after two hours of talks in Luxembourg.
“We had a long discussion of the problems the euro area is facing,” Juncker said.
Tremonti called it a “long and fruitful discussion,” but said nothing on the substance of the talks.
In Brussels, the European Commission said after EU monetary affairs chief Olli Rehn spoke to Tremonti on Tuesday evening that there had been no discussion of a bailout for Italy, which would overwhelm the bloc’s existing rescue funds.
The commission said it would issue a statement later in the day about the situation on financial markets.
“Italian and Spanish bond yields rose to their new record highs. This is a very alarming and scary thing,” Finnish Prime Minister Jyrki Katainen told public broadcaster YLE. “The whole of Europe is in a very dangerous situation.”
Italian Prime Minister Silvio Berlusconi, who has been largely silent, closeted with his lawyers over several ongoing trials, was due to address parliament later yesterday. His speeches, first to the Chamber of deputies and then the Senate, were pushed back until after Italian markets close.
Less than two weeks after leaders of the 17-nation eurozone agreed on a second bailout for Greece, Europe’s worst hit debtor, and adopted measures meant to stem contagion to larger sovereigns, the debt crisis is back with full force.
With many policymakers on holiday, there seems little prospect of immediate European policy action, although Spain said on Tuesday that the main eurozone governments had held telephone contacts on the situation in the markets.
German Economics Minister Philipp Roesler said Italy and Spain were not even discussed at Berlin’s weekly Cabinet meeting yesterday, which he chaired in place of German Chancellor Angela Merkel, who is on vacation and did not call in.
In Rome, an Italian minister said Berlusconi’s Cabinet did not discuss the crisis at its weekly meeting either.
The eurozone’s rescue fund cannot use new powers granted at last month’s summit to buy bonds in the secondary market or give states precautionary credit lines until they are approved by national parliaments in late September at the earliest.
The European Central Bank could reactivate its bond-buying program, but has been dormant for more than four months.
Italy and Spain could offer new austerity measures to try to placate the markets, but Rome has just adopted a 48 billion euro (US$68.8 billion) savings package and Madrid’s lame duck government has just called an early general election for Nov. 20.
Shares in banks exposed to eurozone sovereigns have taken a hammering and are having growing difficulty in securing commercial funding.