Why is Italy not regaining confidence even after it has installed a technocrat government following the EU?s recommendations? Because its risk premium remains high around 500 points.
This week the country is issuing 20 billion euros of new debt, and this marks just the beginning of a difficult quarter for Italy. Later it will face debt obligations of nearly 150 billion euros.
Italy?s national debt is 120% of its GDP, and that is forcing the country to refinance between 15% and 20% of its obligations. If it cannot gain strength, it will be difficult to raise these funds.
Monti should still demonstrate a reformist drive in order to revitalize business while still making budget cutbacks. Doing so will necessitate the European Central Bank (ECB) acquiring some shares of Italian debt.
