Despite some opposition from other euro-zone countries, Italy has been in favour of an aid package to help Greece out of its debt crisis. Italian officials say they will pass a governmental decree to formalize its contribution, estimated at 5.5 billion euro, to the European rescue loan for Greece. Berlusconi said the European Union-bailout was necessary ‘to defend our common currency from speculation.'
Greece reached an agreement with the European Union and the International Monetary Fund on rescue loans to keep Athens from collapse, although it will impose harsh cuts. Estimated at 110 billion euro, it is the first bailout of one of the 16 countries using the euro and will require substantial tax increases and salary and pension cuts for civil servants.
Indeed, the economic disaster in Greece could also have happened in Italy: the two countries have the highest debt-to-gross domestic product ratios in the European Union. Italy's finances, however, fared better during the recession because Italy handled public finances in a more orderly fashion, claims Italian prime minister Silvio Berlusconi.
If Italy's finances were not managed properly ‘we would have either had to pay extremely high interest rates, which would have jeopardized our future finances, or we would have run the risk that Greece faces now ,' Berlusconi said in a speech at a recent meeting of his political party in Rome. Although Italy's economy is the euro region's fourth largest, it shrank in the fourth quarter of last year.
On April 10, European Central Bank president Jean-Claude Trichet praised finance minister Giulio Tremonti for his handling of the Italian economy during the recession, saying his refusal to introduce fiscal stimulus was ‘an appropriate strategy' given Italy's debt burden, which will reach 250 billion euros this year.