Italy's Monti in austerity race as IMF role eyed

Sun Nov 27, 2011 6:27pm EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By James Mackenzie and Francesca Landini

ROME (Reuters) - Prime Minister Mario Monti faces a testing week seeking to shore up Italy's strained public finances, with an IMF mission expected in Rome and market pressure building to a point where outside help may be needed to stem a full-scale debt emergency.

Monti is expected to unveil measures on December 5 that could include a revamped housing tax, a rise in sales tax and accelerated increases in the pension age. But pressure from the markets could force him to act more quickly.

One source with knowledge of the matter said contacts between the International Monetary Fund and Rome had intensified in recent days as concern has grown that German opposition to an expanded role for the European Central Bank could leave Italy without a financial backstop if one were needed.

The source said it was unclear what form of support could be offered, such as a traditional standby arrangement or a precautionary credit line, if a market selloff Monday forced immediate action.

The IMF inspection team is expected to visit Rome in the coming days but no date has been announced.

An unsourced report in Italian daily La Stampa said up to 600 billion euros could be made available at a rate of between 4-5 percent to give Italy breathing space for 18 months.

Such a sum would be beyond the IMF's current capacity and would need new measures such as the issue of new special drawing rights (SDRs) or intervention by the ECB, it said.

The Fund's total lending capacity is currently around $400 billion.   Continued...