Spain aid package would weigh heavily: Italy Finance Minister
MILAN (Reuters) - A 100 billion euro aid request from Spain to its euro zone partners would cost Italy the equivalent of 1.5 percent of its economic output, the finance minister in Rome was quoted as saying on Monday.
Spain, which has already obtained a lifeline worth that much for its struggling banking sector, could seek a sovereign rescue next month, euro zone officials told Reuters on Saturday.
If that happened, "Italy would bear the brunt of the cost," Grilli said in an interview with daily La Repubblica, pointing out that Italy's public debt had already gone up by 4 percent as a consequence of European Union aid given to Greece, Ireland and Portugal.
"If Spain were to obtain aid for no less than 100 billion euros, the Italian share would be equivalent of another 1.5 percent of gross domestic product."
Italy needed to be generous in such circumstances, but also carefully assess the impact on its public finances.
Rome expects Madrid to apply for aid given the worsening of Spain's deficit and its banking crisis, the newspaper said.
Spain is considering asking for a rescue package but wants to know more about its conditions and scope before applying. Doing so would calm financial markets, Italian Prime Minister Mario Monti said on Friday.
Spain is the main focus of investor concerns over the euro zone debt crisis but Italy, with a huge public debt and the European Union's slowest average economic growth rate, is seen as the next weakest link.
The two countries' sovereign debt yields have tracked each other for months, albeit with Spain's borrowing costs consistently higher.
The Italian government was also cautious with regards to a possible decision of allowing more time for Greece to hit its deficit-reduction targets, the paper said, without quoting Grilli directly.
That stance would put Italy in the same camp as Germany with regard to Greece, which is locked in talks with lenders on a further set of reforms in exchange for the new loan tranche it needs to stave off bankruptcy.
In the interview, Grilli reiterated that Italy was not planning to ask for any kind of euro zone aid.
"The country's finances are solid. In 2013 we will meet the goal of a balanced budget adjusted for the (economic) cycle. And this without aid of any sort," Grilli said.
(This version of the story has been corrected in the first paragraph to show Grilli was talking about cost of aid package not a reduction in economic output)
(Reporting By Lisa Jucca; Editing by John Stonestreet)
- U.S. Mega Millions lottery up to $400 million, 2nd-biggest ever
- Pope Francis named Time's Person of the Year |
- Uruguay becomes first country to legalize marijuana trade
- Thousands of South Africans line up to see Mandela lie in state |
- China bitcoin arbitrage ends as traders work around capital controls
Time magazine named Pope Francis as its Person of the Year, crediting him with shifting the message of the Catholic Church. Slideshow