Italy’s borrowing costs rise after Berlusconi case

Italy's borrowing costs rose on Tuesday in a bond auction which raised €4.5 billion ($5.9 billion). Traders said it indicated investor unease following former prime minister Silvio Berlusconi's conviction for sex with an underage prostitute and abuse of office.

Italy's borrowing costs rise after Berlusconi case
File photo: Olivier Morin/AFP

The Italian Treasury raised 3.5 billion euros with zero coupon bonds (CTZs), set to mature in June 2015, at a rate of 2.403 percent, the highest rate since September 2012.

It also raised 510 million euros in inflation-indexed bonds to mature in 2018 at a rate of 2.91 percent, compared to 1.83 percent in April, and €490 million with the same type of bonds to expire in 2026, at a rate of 3.75 percent compared to 3.23 percent in February.

"Berlusconi's conviction adds another layer of political risk at a time when the Letta government is deeply divided over fiscal policy and Italy's economy remains mired in recession," commented Nicholas Spiro, managing director of Spiro Sovereign Strategy.

"Further pressure on Italy's bond market will inflame political tensions, with Berlusconi's People of Freedom (PLD) party heaping more pressure on Letta to take a tougher line with Germany and the European Central Bank," he added.

Berlusconi was sentenced to seven years in prison and banned for life from holding public office, and while the punishment is suspended until all appeals have been exhausted, analysts are concerned of the knock-on effect the ruling could have on Prime Minister Enrico Letta's coalition.

"While it's premature to talk about a renewed flare-up of the bond market crisis in the eurozone, funding pressures in Spain and Italy are resurfacing at a time when the two recession-scarred economies can ill-afford higher borrowing costs," Spiro said.

Italy, with the eurozone's third-biggest economy is struggling to pull itself out of a two-year recession and did worse than thought in the first quarter of this year, shrinking by 0.6 percent.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.


Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.