Thursday, December 15, 2011

Italy: Financial markets Jittery as unions strike against Government’s Austerity Reforms

Italy, Rome — Italian financial market jitters worsened on Monday, as workers angry about government austerity reforms went on strike and held nationwide rallies while investors turned skeptical about an EU pact to save the euro.

Some Fiat’s auto plants were idled and a performance at La Scala opera house in Milan was canceled as unions kicked off the first of days of walkouts and demonstrations against the spending cuts and tax increases the government is seeking to restore investor confidence in the country’s financial future.

That confidence was eroding on Monday, with Milan’s stock index closing down 3.79 percent and the benchmark 10-year bond yield rising 0.52 of a percentage point to 6.76 percent.

Italy did manage to raise €7 billion ($9.4 billion) in a bond auction, though the relatively strong demand was boosted by a bank association promotion waiving fees to buy the bonds.

Investors remain worried about the future of both Italy and the wider 17-nation eurozone despite an EU deal last week to tighten controls on spending. While that deal will boost longer-term budget discipline, it does little to lower current debt and exposed deepening political division.

Britain’s decision not to sign on to the deal agreed in principle by the other 26 EU members also laid bare political rifts. It could prove costly to the other members because of Britain’s insistence that certain EU institutions cannot be used to enforce their new budget rules, Unicredit analyst Erik Nielsen said.

The Italian government’s efforts aimed at stabilizing Italy’s finances to boost growth and lower debt, which stands at 120 percent of GDP, were coming under fire from unions.

Workers joined rallies and a nationwide strike in several labor sectors to protest pension reforms. It was the first in a series of walkouts called over the emergency austerity measures which Premier Mario Monti insists are vital to avert financial disaster.

Metalworkers, including on assembly lines at Fiat’s auto factories, were staging an eight-hour strike, while others walked off the job three hours before the end of the shift.

Also on strike were workers at La Scala, the Milan opera house that was forced to cancel a concert, and typographers at Italian newspapers and web sites.

Public transport union leaders called walkouts for Thursday and Friday. Other public sector employees were set to walk off the job on Dec. 19, while bank workers have a strike called for Friday.

The union leaders say the government’s austerity measures hit too hard at pensioners and workers and not hard enough at the wealthy. A rally was held outside Parliament, which is expected to pass the measures by Christmas.

“Fairness, fairness,” shouted workers marching in Florence.

In Genoa, hundreds of workers, joined by students protesting school budget cuts, were marching toward a rally site. Fiat workers joined hundreds of other blue-collar workers, students and youths in a march in Turin, hometown to the automaker, which is the country’s largest private sector employer.

- AP

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