Italy has dropped out of the spotlight a little following the protracted political soap opera surrounding Silvio Berlusconi. But it remains perhaps the euro zone’s most dangerous flashpoint.
Prime Minister Enrico Letta now has some time to push through economic reforms, cut taxes and spending in an effort to galvanize activity. But already the politics look difficult.
Italy’s three main unions are to strike over the government’s 2014 budget plan. Former premier Mario Monti resigned as head of his centrist party after it supported the budget which he viewed as way too modest, lacking in meaningful tax cuts and deregulation.
The centre-right PDL, which makes up a fractious coalition government with Letta’s centre-left, is crying foul though for different reasons. The budget, which must be passed by year-end, is only a first step towards putting Italy right and it’s in trouble.
This week, Italy will sell debt from bills to bonds at three separate auctions. It has encountered few problems with debt-raising this year but given the backdrop, this bears watching. Rome starts off today with an offer of up to 3 billion euros of zero-coupon and inflation-linked bonds, then up to 8 billion euros of Treasury bills on Tuesday. On Thursday, it will auction up to 6 billion euros of five- and 10-year bonds.