Rome is half out of the woods. Italy’s 10-year bond yields have fallen by over a percentage point since European Central Bank Chief Mario Draghi hinted at a new bond-buying programme. With yields falling and confidence returning, the need for a bailout is waning.
If a bailout can be avoided, it should; nobody wants to see the euro zone’s third-largest economy on life support. And at current yields, Italy’s debt looks almost sustainable: Rome would need nominal growth of 2.4 percent of GDP – which would be below its long-term average – and a primary surplus of 3 percent of GDP, which the International Monetary Fund expects this year.
However, Italy needs to convince investors it can grow its way out of debt, forecast by the IMF to hit 125 percent of GDP this year. And there is a long way to go to make the economy competitive again.
Read more: Analysis & Opinion | Reuters
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