Italy for sale

21 Apr 2006 By Hugo Dixon

With debt at 106% of GDP, a sluggish economy and a budget deficit, Italy is in a box. It needs creative solutions to get out of it. A E400bn asset disposal programme or even a debttoequity swap might do the trick. But it wouldn t be easy to pull off.

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Italian debt rose to 106% of GDP in 2005, after a decadelong declining trend. The country is expected to run budget deficits in excess of 3% until at least 2008, according to S&P, the credit ratings agency, and its debt is expected to peak at 108% of GDP in 2007.

Romano Prodi's victory in April's general election has been confirmed by the highest Italian appeals court. Fewer than 25,000 out of 38 million votes separated Prodi from Silvio Berlusconi, the former prime minister, in the lower house, and Prodi only has a twoseat majority in the Senate.

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