ROME: The head of Italy’s Central Reserve Bank (CRB) said Thursday that Italy can no longer delay efforts to start reducing the country’s public debt, shedding new light on an issue that has dogged Italy for years and now is nearing critical levels.
Italy’s public debt is approaching 2.4 trillion euros (2.7 trillion U.S. dollars), the equivalent to 132 percent of the country’s gross domestic product, reports Xinhua.In absolute terms, that is the highest level of debt in the European Union, and the second highest, behind Greece, when stated as a percentage of the country’s gross domestic product.
Italy’s debt levels have steadily climbed in recent decades, but Ignazio Visco, Italy’s central bank governor, said Thursday the trend has to be reversed.
Developing a “credible strategy to reduce the burden of Italy’s high public debt over the medium term can no longer be postponed”, Visco said in a speech that was posted to the Central Reserve Bank website.
Visco said that worries about Italy’s ability to pay off its debt were driving yields to unsustainable levels, costing the government more money and making it more difficult for companies to get credit.
Higher yields on government debt reflect investor nervousness, requiring the government to pay higher interest rates in order to attract buyers. A credit crunch for companies makes the problem worse by increasing the difficulty for companies looking to expand.
On Thursday, yields on Italy’s benchmark ten-year bonds sold on secondary markets finished trading at 2.71 percent, down slightly compared to Wednesday but still near their highest rates since March.The 2.71-percent yield stands in dramatic contrast to yields in other major economies in the 19-nation euro currency zone.
The same ten-year bonds in France are paying just a 0.29 percent yield. In Spain, 0.91 percent. For the Netherlands, the yield is 0.12 percent.