Italy 'on the precipice'

Prime Minister Mario Monti on Saturday warned of a looming financial crisis in Italy, while tens of thousands of unionists took to the streets of Rome to protest his austerity plans.

"We stepped away from the precipice before, but the hole is growing bigger and it may swallow us up. We are again in a crisis," Monti said on Saturday in Milan.

Monti took over from discredited former prime minister Silvio Berlusconi in November 2011. What he inherited, however, was a recession-plagued nation. To avoid a Greek-style default, Monti has passed a tough austerity package.

The measures, including 24 billion euros ($30 billion) in new taxes for this year alone, pushed down Rome's borrowing costs for a time. But a bank bailout in Spain and the prospect of Greece ditching the euro have pushed the benchmark 10-year Italian bond yield above six percent again in recent days.

To put Italy's situation in perspective, yields pushing through seven percent led to international bailouts for Greece, Portugal and Ireland.

Unionists disagree

The nation's three major unions have criticized Monti's tougher measures, saying that the government's efforts are worsening, rather than helping, the situation.

Monti's cabinet on Friday approved measures worth 80 billion euros to spur economic growth, streamline the notoriously bloated public sector and lower the national debt. Those measures, however, did little to alleviate the protesters' fears.

Organizers of the protests, centered in People's Square in Rome, said that 200,000 turned out for the march. They chanted while waving red-green-and-white striped flags, providing a colorful scene in the capital.

"We are here because the government's program ... is causing the recession to deepen in our country," Susanna Camusso, leader of Italy's biggest labor union told Reuters.

She and other labor leaders are urging Monti not to cut the welfare system to reduce the budget deficit, as planned, and to focus instead on job growth as unemployment climbs above 10 percent.

Some protesters in Bologna clashed with police, but the Rome demonstration remained peaceful.

A political challenge

Monti spoke to crowds in Bologna and Milan on Saturday, focusing on the difficult political challenge he is facing.

He urged the right-left coalition to pass the labor reform, which was finished three months ago but awaits parliamentary approval, in an attempt to reinforce Italy's credibility before EU leaders meet later this month.

He also said that promoting economic growth needs to be a priority for a June 28-29 European Union summit in Brussels.

Monti admitted that his measures for spurring growth would take time to show results and warned of a "long and difficult path."

"We will see some effects soon, but they cannot be measured in the next month or quarter," he said.

tm/slk (AP, Reuters)