Italian minister says referendum won't cause repeat of 2011 debt storm

Fri Nov 25, 2016 10:08am EST
 
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By Steve Scherer

ROME (Reuters) - Economy Minister Pier Carlo Padoan said on Friday the result of Italy's Dec. 4 referendum will not put the country in the eye of a new debt storm like the one that nearly pushed it into default five years ago.

Italians will be called on Dec. 4 to vote on Prime Minister Matteo Renzi's flagship constitutional reform, which he says will strengthen future governments by curbing the powers of the Senate.

Renzi has staked his job on the reform being approved, but opinion polls show the "no" vote well ahead. Government bond yields have been rising on fears of renewed political instability in Italy, the euro zone's third-largest economy.

The gap between Italian and German 10-year-bond yields widened this week to more than 188 basis points, but remained well below the more than 550 basis points reached in 2011.

The yield on Italy's benchmark 10-year bond was more than 3.66 percent on Friday, compared with peaks well above 7 percent reached at the end of 2011.

"The economic fundamentals have improved greatly," Padoan said in an interview on SkyTG24 TV, adding that the banking system and public finances were more stable now in 2011.

The referendum will have just a modest impact on financial markets, a Reuters survey showed on Friday. Investors will likely demand an extra 25 basis points in yield to hold Italian debt over its German equivalent if the "no" vote prevails, the poll showed.

Italian stocks, the worst performers this year across major markets globally, were slightly lower on Friday, taking their year-to-date losses to more than 23 percent.   Continued...

 
Italian Finance Minister Pier Carlo Padoan speaks at a news conference during the IMF/World Bank annual meetings in Washington, U.S., October 8, 2016. REUTERS/Yuri Gripas