European Central Bank President Mario Draghi pledged on Thursday to do whatever was necessary to protect the Euro zone from collapse, including acting to lower unreasonably high government borrowing costs.
The Euro weakened to the lowest in more than 11 years against the Yen as investors sought safer assets amid mounting concern that European leaders are failing to control the region’s debt crisis.
UniCredit SpA and Intesa Sanpaolo SpA were among 13 Italian banks that had long-term debt, deposit or issuer ratings cut by Moody’s Investors Service, which cited the government’s weakened creditworthiness.
Former Italian Prime Minister Silvio Berlusconi will return to frontline politics as the centre-right candidate in next year's general election, a senior official in his PDL party was quoted this week.
Italy's technocrat Prime Minister Mario Monti, appointed last year to steer his country through a debt crisis, said he was confident a stable government would be formed after elections in 2013, playing down fears of deadlock after he steps down.
Italy's government has agreed to cut spending by 26bn Euros over the next three years to plug the gap between spending and income. The cuts, approved after seven hours of talks, include a 10% reduction in the number of civil servants and cuts to healthcare and come as Italy struggles to keep the faith of investors.
As expected, more than two-thirds of the lawmakers in Germany's parliament moved on Friday to approve the permanent Euro rescue fund, the European Stability Mechanism, and a fiscal pact long championed by Chancellor Angela Merkel.
The German government and opposition reached on Thursday a deal that will allow parliament to approve the European Stability Mechanism, ESM, next week, but Germany's top court may delay the rescue fund's start date, saying it needed time to study the treaty.
Italy is hugely exposed to the risk of contagion from the debt turmoil in the euro zone, said Prime Minister Mario Monti, suggesting the European Central Bank take action to help cool borrowing costs.
Italy's Prime Minister has not ruled out bringing in the army to deal with the increasing levels of violence across the country. PM Mario Monti raised alert levels Sunday at sensitive sites across the country after a rebel group shot and wounded the head of the state-controlled nuclear energy company, Ansaldo Nucleare.