Markets rally as Italy seeks help from China

Telegraph.co.uk – September 13, 2011

The chairman of China Investment Corporation met with Italy’s finance minister last week in Rome, The Wall Street Journal and the Financial Times reported, citing unnamed sources.

It it unclear whether any agreement was reached.

The news comes as Italy prepares to sell up to €7bn (£6bn) of bonds a day after borrowing costs surged to an auction of short-term debt and markets worried that Greece was sliding toward default.

Italy is selling the debt to help pay for €14.5bn of bonds maturing on September 15.

Yields on Italian bonds are at their highest since the European Central Bank started buying the country’s bond last month to ease pressure on the government as it attempts to push through a tough austerity package.

Anger in the eurozone has been growing over the watering down of the measures by Prime minister Silvio Berlusconi ever since it was approved by the Cabinet on August 12.

 CIC was created in 2007 to invest a portion of Beijing’s $3.2 trillion in foreign reserves. The talks in Rome were attended by Italian Finance Minister Giulio Tremonti, CIC chairman Lou Jiwei and officials of China’s foreign currency regulator and the Cassa Depositi e Prestiti, an Italian government investment vehicle, the Wall Street Journal said.

Markets in Europe fell heavily yesterday as worries over the eurozone debt crisis escalated. The worries hit Wall Street which only rallied at the end of the day after the reports that Italy was seeking the help of China.

Asian markets were mostly higher on Tuesday as investors took heart from the late rally in the US.

Credit default swaps indicated the chance of a Greek default in the next five years has soared to 98pc, after the debt laden country warned on Monday it would run out of cash next month without the next tranche, around €8bn, of a bailout loan.

Greece is being kept solvent by a €110bn international rescue loan package, while an agreement in July to double the bailout size has yet to be implemented.

However, eurozone policymakers have threatened to withhold the money as patience with Athens’ repeated fiscal slippages wears thin.

The so-called troika of International Monetary Fund, European Central Bank and European Commission representatives will be returning to Greece this week.

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