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Euro Leaders Demand Austerity as Italy Nears New Vote

*from www.bloomberg.com, Mar. 4, 2013 (To view original article click here.)

Take Away #1: European leaders demanded that euro members press on with budget cuts as Italy’s anti-austerity vote last week resulted in a political deadlock.

Key Facts and Figures:

  • Finance ministers from the 17-member single-currency bloc are meeting in Brussels today to discuss issues including a bailout for Cyprus.
  • EU Economic and Monetary Affairs Commissioner Olli Rehn echoed Germany’s stance that there is no scope for the bloc to let up on budget discipline.
  • Italian stability following last week’s election, which ended in a four-way split, threatens to reignite concern about the deepening debt crisis.
  • Voters in Italy revolted against German-inspired austerity measures handing the party of Beppo Grillo and its anti-spending cut message and a call for referendum on euro membership, more than 25 percent of the vote.

Take Away #2: The Grillo Movement is seeking to influence the program of Italy’s next government and would seek policy concessions in exchange for a possible walk out.

Key Facts and Figures:

  • Senators-elect in Grillo’s party may consider staging a walkout during a confidence vote to allow the chamber to forge a government.
  • Italian 10-year bond yields climbed to a three-month high last week jumping 34 basis points to 4.79 percent. Yields rose 7 basis points to 4.86 percent as of 4:23 p.m. in Rome.
  • Spanish 10-year yields and equivalent Portuguese debt were little changed at 5.09 percent and 6.3 percent respectively.
  • Spanish bonds rallied last week along with Greek and Portuguese securities on speculation that the European Central Bank will maintain control over the three-year-old debt crisis.

Take Away #3: Italian President prim tells leaders to put interest of the public first, as Italy edges closer to a new vote.

Key Facts and Figures:

  • President Napolitano told political leaders on March 2 to put public interest and the country’s international reputation first as Grillo reiterated that his party won’t back any government.
  • Bersani, whose faction won the most votes, is resisting cooperation with former premier Silvio Berlusconi or Grillo’s upstart movement.
  • Italy may hold new elections this year if Bersani and his Democratic Party fail to find enough backing in parliament to form a government.

Take Away #4: Italy may have no choice but to fall in line with austerity policies.

Key Facts and Figures:

  • Any significant attempt to unravel Prime Minister Mario Monti’s austerity policies would risk serious turmoil across Europe.
  • “Our base case remains that Brussels, Frankfurt, and Berlin, jointly with bond vigilantes will simply leave Italy no choice but to stay on the straight and narrow,” says Holger Schmieding, chief economist at Berenberg Bank.
  • German Chancellor Angela Merkel urged Italy not to stray from reforms.
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Take Away #5: Euro Ministers discuss Cyprus, which has since June been in talks on receiving the bloc’s fifth rescue package.

Key Facts and Figures:

  • Ministers want to reach an agreement by next month after Cypriot voters elected Nicos Anastasiades as their new president.
  • Anastasiades has to revive the stalled talks as Cyprus seeks aid that could reach the size of its almost 18 billion euro economy.
  • Commissioner Olli Rehn says assistance to Cyprus is crucial since a disorderly default would result in the country’s exit from the Euro area, and expressed confidence that a solution that addresses the concerns of all euro countries can be found.
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*To view original article from www.bloomberg.com click here.

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