“European Union leaders piled pressure on Italy’s rival factions to form a unity government committed to budget rigor after a deadlocked election stirred fears of an quagmire that would re-ignite the euro debt crisis.
In a message that resonated in Rome, EU President Herman Van Rompuy warned in Tallinn,Estonia, that backsliding on budget discipline and economic reforms would shatter market confidence in the 17-nation currency union’s crisis management.
“Every time we turn a corner, we must keep in mind that just around that corner lies the danger of complacency,” Van Rompuy told Estonia’s parliament yesterday. “There is no way back. And this we simply cannot afford.”
Italy’s stalemate shook European bond markets, with investors moving money from crisis-hit Spain, Portugal, Greece and Italy itself to the perceived haven of Germany. Ten-year Italian yields rose by the most in 14 months, rising 41 basis points to 4.9 percent; the risk premium against German debt jumped 51 basis points to 343 basis points.
As leaders of Italy’s two rival blocs, Democratic Party chief Pier Luigi Bersani and former Prime Minister Silvio Berlusconi, weighed their options, European officials alternated between pleading with them to craft a stable government and fretting that they won’t manage to….”
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