Tags: Roubini | Firm | Italy

Italy May Have to Restructure Debt Next Year, Roubini’s RGE Says

Wednesday, 23 Nov 2011 09:44 AM

Italy “is past the point of no return” and may be forced into a managed debt restructuring as early as next year, according to Roubini Global Economics LLC, the advisory firm co-founded by economist Nouriel Roubini.

“So far, no euro-zone country has managed to recover market confidence once bond yields have crossed the 7 percent mark, with Greece, Ireland and Portugal all requesting a financial bailout soon after,” New York-based RGE analysts including Katharina Jungen wrote in the note published today.

Italian 10-year bond yields surged past the 7 percent threshold this month to euro-era records as investors bet that the nation will struggle to tame the debt crisis. Former Prime Minister Silvio Berlusconi resigned amid the turmoil on Nov. 12 after his ruling majority evaporated.

His successor, Mario Monti, who leads a technocratic government, has pledged to spur economic growth and reduce debt in the euro-region’s third-largest economy. Monti’s government will seek to cut Italy’s 1.9 trillion-euro ($2.6 trillion) debt, equivalent to about 120 percent of gross domestic product and the second-biggest burden in the euro region after Greece.

Deteriorating growth prospects will prevent the new government from meeting its fiscal targets over the next three years and “debt will remain on a clear upward trajectory,” RGE said in the note. “The size of the financial assistance needed to support Italy coupled with the inadequacy of the euro zone’s rescue strategy is likely to force the country into a managed debt restructuring as early as 2012.”

The new administration will first focus on implementing austerity measures passed under Berlusconi that aim to balance the budget in 2013, Monti told the Senate on Nov. 17. It will then take additional steps that may include reinstating property taxes, overhauling the tax system and pension rules, trimming the government’s size and modifying labor laws, Monti said.


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Italy is past the point of no return and may be forced into a managed debt restructuring as early as next year, according to Roubini Global Economics LLC, the advisory firm co-founded by economist Nouriel Roubini. So far, no euro-zone country has managed to recover market...
Roubini,Firm,Italy
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2011-44-23
Wednesday, 23 Nov 2011 09:44 AM
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