October 11, 2018 / 12:50 PM / a year ago

German minister: Rescue package for Italy won't be necessary

BERLIN, Oct 11 (Reuters) - German Finance Minister Olaf Scholz said on Thursday he did not expect Italy to need aid to deal with its debt pile.

Italy has the second largest debt in the European Union as a proportion of its gross domestic product (GDP) after Greece, which has received three multi-billion-euro bailouts over the past few years. Italy’s debt exceeds 130 percent of GDP.

Italy’s previous centre-left government passed several measures to help the banking sector recover after a deep recession, culminating in the state bailout of the country’s third-largest bank, Monte dei Paschi in 2017.

Scholz told German broadcaster ARD that Europe was well prepared for possible crises.

“We have created many oversight bodies to better monitor the banking system, and we have developed resolution mechanisms and funds to respond to crises without the need for government funding,” he said.

Every country was responsible for its own economy, he said, adding: “If you have a lot of debt, as is the case with Italy, then of course you have to pay much more attention than other countries to how financial markets handle future public debt.”

Italy paid its highest borrowing rate in five years in a bond auction on Thursday after the government alarmed investors by tripling the budget deficit target for next year.

Last week, the European Commission sent a letter to the government warning its budget plans were a reason for “serious concern” as they appeared to deviate significantly from agreed fiscal targets. (Reporting by Riham Alkousaa; editing by David Stamp)

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