4 Aug 2011

Italian PM says economy solid

3:29 pm on 4 August 2011

Italian Prime Minister Silvio Berlusconi has tried to allay fears his country will be drawn into the debt crisis engulfing some European countries.

Mr Berlusconi told parliament on Wednesday that Italy's banks were solid and solvent and the economy was solid.

The premier's comments come after heavy losses on the Milan stock market and a sharp rise in yields on Italian bonds.

Italy is about to introduce a €43 billion austerity package.

The BBC reports that the eurozone's third largest economy has so far managed to avoid sovereign debt problems, despite having one of the highest debt-to-GDP ratios in the eurozone at 120%.

But the economy is twice as big as that of Greece, Portugal and the Irish Republic combined, so a bailout would probably be unaffordable, it says.

Mr Berlusconi said Italy had solid economic foundations and called the recent fall in bond yields a crisis of faith in the international markets.

He told MPs that the government would need to approve fiscal reforms in order to have a tax regime more favourable for families, workers and businesses.