Berlusconi to walk like a Grecian pol?

Berlusconi, bloodied, but not yet out

It appear so:

Italy’s stock and bond markets endured a volatile session on Monday as Silvio Berlusconi was reported to have denied reports that he intended to resign as prime minister.

Fabrizio Cicchitto, head of the parliamentary group of Mr Berlusconi’s People of Liberty party, said in a statement that the prime minister had told him that “rumours of his resignation were baseless”.

Ansa news agency also quoted Mr Berlusconi as telling people close to him that the reports were not true. A page on Facebook under the name of the prime minister quoted him as dismissing the rumours.

Franco Bechis, deputy editor of Libero, a pro-Berlusconi newspaper, had said earlier on Monday that Mr Berlusconi would resign on Monday night or Tuesday. Mr Bechis later said on Twitter that the prime minister had decided after talking to his family in Milan to call a vote of confidence in his government on the basis of its mandate to pass reforms requested by the European Union.

A financial source close to the prime minister told the Financial Times that Mr Berlusconi intended to step down later on Monday.

The reasons for Berlusconi’s latest humiliation?

European efforts to solve a growing sovereign debt crisis have failed to quell market unease on the Continent, and the skepticism over Greece points to continued volatility this week.

Among fresh warning signs, Italy’s cost of borrowing has jumped to the highest rate since the country adopted the euro.

And:

The yield on 10-year Italian notes has surpassed that on Spanish debt by nearly a full percentage point, reaching 6.51 percent on Monday after leaders at a meeting last week of the Group of 20 nations failed to come up with details on how to stop the European crisis from spreading. The rising yield is troubling because once the interest rates on the debt of Greece and Portugal surpassed 7 percent they shot up far higher, requiring those countries to turn to outside sources of financing. Rates on their debt remain in double digits.

At the end of last month, Italy issued 3 billion euros worth of bonds at an interest rate of more than 6 percent, about 1.5 percentage points higher than it had had to pay as recently as the summer. The extra bond yields are adding as much as 3 billion euros (about $4.1 billion ) annually in additional interest payments, estimates Tobias Blattner, a former economist at the European Central Bank who is an economist at Daiwa Securities in London.

Analysts are concerned that if interest rates on Italian debt keep rising, the country may no longer be able to afford to borrow on the open markets and instead would have to turn to official lenders like the European Union or the International Monetary Fund.

The latest rate “is a warning,” said Mark McCormick, currency strategist at Brown Brothers Harriman. “Seven percent would be a point of no return.”

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