A sale of one-year bills on Wednesday saw yields rise, this after the Treasury asked parliament to raise the ceiling on this year’s net debt issuance to 98 billion euros from 80 billion, given the struggle to rein in public finances and a government commitment to pay outstanding bills to firms, which at least could give the economy a boost.
Parliamentarians have a bigger fish to fry in the form of Silvio Berlusconi. A cross-party Senate committee that must decide on whether to bar him from political life drew back from the brink on Tuesday but has caused growing tension between the coalition parties with some of Berlusconi’s allies threatening to pull the shaky government down.
Together, Prime Minister Enrico Letta’s centre-left Democratic Party and the anti-establishment 5-Star Movement have the numbers on the committee to force the issue but the delay suggests a scramble to find a face-saving compromise. One of Berlusconi’s bloc has suggested he could resign to circumvent the process in anticipation of a later pardon from the presidency.
A full and final vote by the Senate is now expected in mid-October so uncertainty will reign for some time just as the Federal Reserve prepares to start throttling back its monetary stimulus and with German elections only 10 days away. Letta told parliament last night that political turmoil was pushing Italian borrowing costs higher, which is undeniable.