Mario Draghi fears Italian debt spiral
Italy risks a debt spiral without “drastic” steps to cut spending and restore confidence in public finances, the country’s central bank governor has warned.
By Ambrose Evans-Pritchard
“We must act fast. The sorts of interest rate rises seen over the last three months, if protracted, could lead to an uncontrollable spiral,” said Mario Draghi, who takes over as head of the European Central Bank next month.
Mr Draghi said austerity measures must be enacted “immediately” and warned that Italy’s €54bn austerity package is “not enough”.
Yields on 10-year Italian bonds surged above the danger level of 6pc in August on recession fears. Intervention by the ECB saved the day but yields have been creeping back up again as the ECB steps back. Yields rose to 5.71pc yesterday. Germany’s Bundesbank is adamantly opposed to further ECB bond purchases.