Italy raises money at lower rates despite upheaval

Last Updated: Wed, Dec 12, 2012 19:30 hrs

Italy successfully sold €6.5 billion ($8.45 billion) in bonds the country's first debt auction since the country's Prime Minister Mario Monti announced his decision to resign.

The Italian Treasury reported that the interest rate on the bonds was 1.46 percent, down from the 1.76 percent paid in the last such offer in November. Demand was nearly double the amount on offer.

Italy's political foundations have been shaken after Premier Mario Monti decided over the weekend to step down a few months earlier than his term's end after Silvio Berlusconi's party yanked its support. Monti's move will likely force elections to be held in February, about two months ahead of schedule.

Monti was brought in late last year by Italy's president to replace Berlusconi after investors lost faith in the country's efforts to get a control of its finances, sparking fears of a Greek-style sovereign debt crisis. Monti, an economist, and his unelected government of technocrats have followed a strict austerity agenda, including pension reform, spending cuts and higher taxes. This has widely convinced fellow European leaders and investors that Italy is steadily returning to a more stable financial footing.

But while Berlusconi's party at first supported Monti's government, the media mogul abruptly changed face and started blaming the severe austerity for failing to pull Italy out of its stubborn recession.

Berlusconi announced over the weekend that he is planning to run for what he hopes is his fourth term as premier — in spite of opinion polls that show his popularity is sagging with voters.

Monti insisted this week that he is concentrating on making the most of his remaining time in office and isn't thinking about running about office — for now.

At a public appearance Wednesday night, Berlusconi claimed that he would back a government of moderates in the next election should Monti agree to head it and that in such a case he would step aside as a candidate. But Berlusconi also added a condition that seemed virtually impossible to be realized -- that such a Monti-led government have the backing of his former longtime ally, the Northern League, which has been one of Monti's bitterest foes.

Monti has been wooed for weeks now by moderates to run for the premiership.

In a speech in Rome Wednesday, Monti insisted that efforts to regain Italy's credibility abroad and in financial markets were the best prescription for jump-starting the ailing economy.

Encouraging the country's industrialists to keep up exports, Monti said that "a credible country is the best ally for those who have the courage to push the frontier of their own activities beyond national borders."

In a further sign of Italy's stagnant economic climate, the national statistics bureau ISTAT said that home sales slumped more than 23 percent in the second quarter of this year compared with the same period a year earlier.

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