Italy 'will not need a bailout', says Monti

I / Rome June 13, 2012, 8:35 IST

Italy will not need a bailout to survive the economic debt crisis, Prime Minister Mario Monti said in an interview with German radio, amid fears Rome may be forced to call for aid.

"Italy even in the future will not need aid from the European Financial Stability Fund," Monti told Public Radio ARD yesterday according to Italian media reports.

The former EU commissioner, who has been working hard to deny rumours that Rome is at risk of contagion, called on the markets and financial observers "not to be governed by cliches or prejudices."

"I understand that Italy could have been associated with the idea of an undisciplined country in the past," but "now it is more disciplined than many other European countries," he was quoted as saying.

"Our country pays through its financial contribution...To support Greece, Portugal, Ireland and now Spain. And now it also pays through extremely high interest rates because of tensions on the markets," he added.

Earlier yesterday Monti slammed as "totally inappropriate" a suggestion by Austrian Finance Minister Maria Fekter that Italy may be forced to follow stricken Spain into begging for a financial rescue because of its high borrowing costs.

Rome is struggling to allay market fears that it may be next in the debt-crisis firing line in the wake of a bailout for Spanish banks this weekend and ahead of Greece's election Sunday which could force Athens out of the eurozone.

Skittish investors fearing a knock-on effect from Spain to Italy caused markets to plunge Monday and the yield on Spanish and Italian bonds spiked.

Italy's 10-year government bond yield leapt to a high of 6.197% from the previous day's closing level of 6.03%.

Monti's comments came ahead of a planned Italian sale of 12-month bonds on Wednesday, which is being seen as an important test for Rome.

While Italy's banks are not exposed to the real estate crisis which has rocked Spain and its deficit is lower, there are fears the recession-hit country's public debt mountain of 1.9 trillion euros may make it the next domino to fall.