Spain aid package would weigh heavily: Italy Finance Minister

Mon Oct 15, 2012 3:42am EDT
 
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MILAN (Reuters) - A 100 billion euro aid request from Spain to its euro zone partners would shave 1.5 percent off Italy's economic output, the finance minister in Rome was quoted as saying on Monday.

Spain, which has already obtained a lifeline worth that much for its struggling banking sector, could seek a sovereign rescue next month, euro zone officials told Reuters on Saturday.

If that happened, "Italy would bear the brunt of the cost," Vittorio Grilli said in an interview with daily La Repubblica, pointing out that Italy's public debt had already gone up by 4 percent as a consequence of European Union aid given to Greece, Ireland and Portugal.

"If Spain were to obtain aid for no less than 100 billion euros, the Italian share would be equivalent of another 1.5 percent of gross domestic product."

Italy needed to be generous in such circumstances, but also carefully assess the impact on its public finances.

Rome expects Madrid to apply for aid given the worsening of Spain's deficit and its banking crisis, the newspaper said.

Spain is considering asking for a rescue package but wants to know more about its conditions and scope before applying. Doing so would calm financial markets, Italian Prime Minister Mario Monti said on Friday.

Spain is the main focus of investor concerns over the euro zone debt crisis but Italy, with a huge public debt and the European Union's slowest average economic growth rate, is seen as the next weakest link.

The two countries' sovereign debt yields have tracked each other for months, albeit with Spain's borrowing costs consistently higher.   Continued...