European credit worries spread to Italy

Amid resurging credit worries in Europe following the turmoil in Greece, the prices of Italy's government bonds have fallen significantly.

The 3rd largest economy in the euro zone has huge fiscal deficits, and its own financial crisis would have a far greater impact than that of Greece.

In the European bond market this week, the prices of Italy's government bonds fell to the lowest level since the euro was introduced.

The yield on its 10-year bond, which indicates the interest rate at which the Italian government can raise money in the market, rose to around 6.4 percent at one point.

The Italian government announced new measures to restructure its finances, including raising the pension age, and on Friday agreed to accept a monitoring mission from the IMF.

During the Asian financial crisis in the late 1990s, the IMF sent a monitoring mission to South Korea and other countries, demanding severe austerity measures in return for emergency lending.

The Italian government maintains that its acceptance of the mission is voluntary with no loan attached to it.

It says the objective is to check the progress it is making in implementing the fiscal restructuring measures it promised at last month's euro zone summit.

The euro zone countries intend to keep the crisis from spreading further by significantly increasing the fund to prevent defaults.
However, raising funds from outside Europe is expected to take more time, and the focus is on whether Italy's fiscal reconstruction will get on track.

Saturday, November 05, 2011 22:23 +0900 (JST)