Euro falters over Italy, Greece political uncertainty
November 9th, 2011 - 7:44 pm ICT by IANSMoscow, Nov 9 (IANS/RIA Novosti) The euro fell against the US dollar Wednesday and European markets slumped with it, amid lingering uncertainties over who will lead a new Greek government and Italian bond yields entering dangerous territory.
The yield on Italy’s benchmark 10-year sovereign bond rose to a record 7.25 percent Wednesday morning, above the seven percent level that triggered bailout requests from Portugal, Ireland and Greece.
Italy’s state debt stands at about 1.9 trillion euros ($2.6 trillion). Some analysts suspect that Italy’s debt problem is simply too big to bail out.
The Euro had fallen by over one-and-a-half cents against the dollar, to $1.3664 by 10.30 GMT from 1.3834 at Tuesday’s close.
“The rotation in the political elite of Greece and Italy is keeping investors nervous, prompting them to invest in safer assets to live through the period of uncertainty,” said BroCo brokerage analyst Alexei Matrosov.
On Monday Greek Prime Minister George Papandreou agreed to resign, paving the way for a coalition government of his center-left PASOK party and the center-right opposition New Democracy party.
Early elections have been scheduled for Feb 19, 2012. A coalition government will rule the country until the election.
The 8 billion euro ($11 billion) sixth tranche previously approved by the troika of international lenders for debt-saddled Greece was frozen after Papandreou proposed holding a referendum on the new bailout package.
A popular vote was likely to frustrate all agreements with creditors. He was later forced to back down on the referendum proposal.
Without loans from the European Union (EU) and International Monetary Fund (IMF), Greece may default on its 360 billion euro ($495 billion) debt in the coming weeks.
On Tuesday, the euro was supported by a statement from Italy’s Prime Minister Silvio Berlusconi about his intention to resign.
On Wednesday, however, investors questioned the ability of a new prime minister to resolve debt-burdened Italy’s economic problems in the short term, and uncertainty remains about when exactly Berlusconi will go.
—IANS/RIA Novosti
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Tags: bailout package, dangerous territory, democracy party, george papandreou, greece italy, greek government, greek prime minister, international lenders, international monetary fund, international monetary fund imf, italy greece, new democracy, political elite, political uncertainty, popular vote, prime minister silvio, prime minister silvio berlusconi, referendum proposal, ria novosti, silvio berlusconi