Berlusconi Takes Page from GOP Playbook: Looks to Balance Italy’s Budget

It looks like the new season of the Jersey Shore isn’t the only American import making its debut in Italy (NYSE:EWI) this week. Today the nation’s notoriously provocative prime minister, Silvio Berlusconi, told Rome-based media that he is pushing the Italian parliament to pass a balanced budget amendment. The provision would help the debt-stricken nation ensure that its federal spending would not increase unduly. Berlusconi also recommended implementing changes that would liberalize its labor market, and speed asset sales, according to Bloomberg.

Related Hot Feature: Italy has 6 Dangerous Problems Which Could Smack the European Economy.

Borrowing costs of Italian and Spanish (NYSE:EWP) sovereign debt have surged higher this week as fears spread of a potential default in the European nations. Fears over the stability of the euro have also become a concern, as “the difference between the yield on 10-year Italian bonds and similar German securities reached 416 basis points today, a record since the adoption of the single currency.” Italian national debt will reach a level of 120% of its annual GDP this year, making it the second most indebted Eurozone member behind Greece.

Berlusconi’s announcements have already sturdied confidence in Italian bonds, with yields falling in bond market exchanges today. An Italian (NYSE:EWI) default would prove far more deadly to the global financial system than a Greek default because of the difference in scale of the economies. Italian GDP stands at $2.11 trillion, according to the world bank, compared to $329 billion in Greek GDP. An Italian default would see more than $2.25 trillion worth of paper go bad, an event that would devastate european banks with high exposure, the strength of the euro, and global banks with exposure to either.