Tags: roubini | italy | markets | berlusconi

Roubini: Italy Markets Better Off Without Berlusconi

Monday, 05 Sep 2011 08:56 PM

Italian markets would be better off if Italian Prime Minister Silvio Berlusconi stepped down, as investors in the country's debt would give the nation a break, says New York University economist Nouriel Roubini.

Italy is rolling out fresh fiscal austerity measures although government credibility will remain a concern among investors as long as Berlusconi remains in office.

"I think that if Berlusconi was gone tomorrow, Italian spreads, even with the same policies, would be 50-100 basis points lower," Roubini tells CNBC.

The European Central Bank is propping up the Italian bond market until continental authorities approve a larger European Financial Stability Fund (EFSF), according to Roubini.

That fund won't do as much good as it could unless the crisis confidence is resolved, which will come with Berlusconi leaving.

"Even when EFSF is approved, they are going to run out of money if they have to backstop Italy or Spain," Roubini says. "Therefore you double or triple the EFSF resources.”

Berlusconi is trying to push through a $64 billion austerity package amid calls for strikes and protests. The austerity package is the second announced in a month and was needed to convince the European Central Bank to buy Italian debt.

Experts says the country is worn out.

"There is a sense that, mainly because of the abruptness of the crisis, Italy is not ready, politically and psychologically, for what is now being demanded of it," says Nicholas Spiro, who runs Spiro Sovereign Strategy, a London-based consulting firm specializing in sovereign-credit risk, according to Bloomberg.

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