Italy, France under pressure to prop up eurozone
Italy was to put new crisis budget action before parliament on Thursday and France worked on urgent extra measures in a race by two key eurozone states to prevent a meltdown on financial markets.
Italian Finance Minister Giulio Tremonti will address lawmakers called back from summer recess for an emergency discussion on measures including the introduction of a constitutional amendment to enforce balanced budgets.
Italy -- the eurozone's third largest economy -- is under pressure from the European Central Bank to implement long-delayed structural reforms quickly.
The reforms are the condition for a controversial ECB programme to support crisis-hit Italian and Spanish bonds with massive purchases this week which have lowered their borrowing costs sharply.
"Concrete measures to be adopted in the coming hours -- the markets now want nothing else. The time for words is over," read an editorial in business daily Il Sole 24 Ore, expressing "disappointment" over a lack of concrete measures so far.
"There needs to be concreteness today if we want to avoid another dramatic day on financial markets," the newspaper said, adding: "The government has the responsibility of taking immediate decisions. Even if they are painful."
Corriere della Sera took a similar line, saying: "These days of void and indecision condemn to uncertainty and panic those who invest, those who buy, those who sell and those who save. A disaster within a disaster."
Prime Minister Silvio Berlusconi has promised to accelerate planned austerity measures to bring the budget into balance in 2013 instead of 2014, as planned earlier, and the cabinet is set to meet next week to approve extra budget cuts.
Italian reports on Thursday said the cabinet will meet on August 16.
Italian President Giorgio Napolitano -- a highly respected but mostly ceremonial figure whose popularity ratings are far above Berlusconi's -- cut short his holiday on Thursday for a meeting with the prime minister.
Among the proposed measures on the table are a wealth tax on bank deposits, a quicker increase in the minimum retirement age and deep cuts in bureaucratic costs.
After meeting Berlusconi on Wednesday, trade unions and big business however said proposed changes to labour laws to make firing from permanent contracts easier would have to wait and that any reforms would have to be "equitable."
Berlusconi said: "We have to act quickly. We have taken on heavy commitments" but the government has so far refused to spell out reforms demanded by the ECB.
ECB chief Jean-Claude Trichet warned earlier this week that Europe was facing "the worst crisis since the Second World War" and said the bank had been "extremely clear" with governments on actions which need to be taken.
Analysts have highlighted the current weakness of Berlusconi's centre-right coalition and cast doubt on its ability to implement reforms, warning Italy could get dragged into the same debt spiral which saw Greece, Ireland and Portugal needing an international debt bailout.
There have been fears over France's deficit too and French President Nicolas Sarkozy was forced to cut short his holiday on Wednesday to announce new budge-cutting measures as the Paris stock market fell sharply.
Market rumours that France was set to lose its top triple-A rating were swiftly denied by the government and Fitch promptly confirmed Paris's top rating.
Standard and Poor's, which downgraded the United States last week, has also said the outlook for France's triple-A rating is stable.
Analysts at French bank Credit Agricole highlighted jitters in the markets saying: "Bears have returned amid the renewed eurozone woes."
Eurozone member Cyprus added to the mix, announcing Wednesday tax hike proposals to trim its fiscal gap but Fitch Ratings downgraded it by two notches and said it will likely need an EU bailout.
© 2011 AFP