MPs beg Monti to spend more as yields soar

 
Tim Wallace
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ITALY’S borrowing costs jumped again yesterday as the sovereign debt crisis continued, while official data showed industrial output plunging across the Eurozone, underlining the crippling impact on the real economy.

Prime Minister Mario Monti came under pressure from MPs who demanded he slow down his austerity programme, asking him to borrow more in an effort to boost short-term economic growth.

The leader of the Democratic Left party told Monti he should consider pushing back its structural balanced budget target, which is currently set for next year.

Meanwhile Angelino Alfano from the People of Liberty bloc said he will continue to support Monti as long as he tells German leader Angela Merkel there may be a “negative reaction” if she does not allow governments to spend more.

However, German finance minister Wolfgang Schauble defended the unelected PM, saying “If Italy continues along Monti’s path there will be no risks,” while Monti himself instead called for more taxes, arguing it “may make sense” to impose a financial transactions tax across the whole EU.

Markets put more downward pressure on spending, charging the government 3.972 per cent to borrow €6.5bn (£5.3bn) for one year – up from 2.34 per cent a month ago.

In contrast, the US continued to benefit from the flood of cash leaving troubled Eurozone governments, with its 10-year borrowing costs falling to a new record low of 1.622 per cent.

Meanwhile new data showed Eurozone industrial output as 2.3 per cent lower in April than in the same month of 2011.

Italy led the fall with a 9.2 per cent collapse, followed by an 8.3 per cent fall in Spain.