November 07, 2011 at 12:00 PM EST
E.U. urges Italy to commit to cuts
Worried about Italy's financial health, the European Commission urged Rome on Monday to demonstrate its commitment to budget cuts and called on the eurozone to quickly beef up its bailout fund. The European Union's executive arm confirmed it was sending a monitoring mission to Italy this week to ensure that Prime Minister Silvio Berlusconi's government follows through on promised measures to slash a massive debt. Brussels has sent a questionnaire to Rome asking the government to clarify what "concrete action plans" will be undertaken and the timeline for implementing the measures, a commission spokesman said. Eurozone finance ministers meeting in Brussels later Monday expect Italian Finance Minister Giulio Tremonti to provide these clarifications, said the spokesman for E.U. economic affairs commissioner Olli Rehn. With markets doubting Rome's commitment to taking tough measures to reduce its 1.9-trillion-euro debt pile, Berlusconi has invited the International Monetary Fund to join the European Commission in scrutinising the country's books. One expert said the commission's team would provide their assessment to euro-zone ministers some time this month while the IMF would likely present its own report. Italy has come under fire from the markets as its borrowing costs soared to record highs on Monday, hitting the sort of levels that forced Greece, Portugal and Ireland to take tens of billions of euros in E.U.-IMF bailouts. The market pressure prompted the European Commission to urge eurozone leaders to speed work on boosting the firepower of the 17-nation bloc's 440-billion-euro bailout fund, the European Financial Stability Facility (EFSF). Euro-zone leaders want to increase the EFSF's lending capacity to one trillion euros and planned to get it done by the end of November but observers said the situation in the markets, notably in Italy, "changed the game." The euro-zone wants to boost the fund without without increasing the guarantees provided by individual governments. One scheme would see the EFSF serve as an insurance policy on debt issued by distressed nations in order to convince investors to keep buying such bonds with reasonable interest rates. The euro-zone has struggled, however, to develop a second plan to attract nations outside the eurozone, namely emerging powers like China, to put money into a separate investment vehicle to top up the EFSF. Europe failed to secure firm commitments on this course from G20 partners at a summit last week.
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