Monti urges prompt action on debt costs
ITALY’S PRIME minister Mario Monti warned of a potential break-up of Europe without greater urgency in efforts to lower government borrowing costs, as a stand-off over European Central Bank help for Italy and Spain hardened.
Mr Monti, in an interview with Germany’s Der Spiegel magazine published last weekend, said that disagreements within the 17-nation euro area were detracting from the policy response to the debt crisis and undermining the EU’s future.
“The tensions that have accompanied the euro zone in the past years are already showing signs of a psychological dissolution of Europe,” Mr Monti said.
While he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market, Mr Monti said the problems “have to be solved quickly now so that there’s no further uncertainty about the euro zone’s ability to overcome the crisis”.
Spain and Italy, whose surging borrowing costs have shunted them to the heart of the euro-area turmoil, are resisting pressure from ECB president Mario Draghi to request aid formally in return for strict conditions before the central bank will buy their bonds.
Mr Monti and Spanish prime minister Mariano Rajoy have both said they will await further details as the ECB works up its plan.
The German government said for the first time yesterday that Chancellor Angela Merkel supported Mr Draghi’s proposals.
French president François Hollande is pushing Mr Monti and Mr Rajoy to request aid from Europe’s bailout fund to help ease markets and protect France from speculation, Italian newspaper La Corriere della Sera reported, without citing anyone.
Greece, the country at the nexus of the debt crisis, agreed after more than a week of meetings with representatives of the so-called troika – the International Monetary Fund, the ECB and the European Commission – on the need to strengthen policy efforts to support the economy and comply with its bailout terms.
“We made a lot of good progress,” Poul Thomsen, the IMF’s representative to Athens, said after a meeting with finance minister Yannis Stournaras ended yesterday. The troika will return to Athens early next month.
Meanwhile investors and politicians are grappling with the significance of Mr Draghi’s comments on sovereign debt purchases.
While markets initially tumbled after Mr Draghi said Spain and Italy would have to formally request a resumption of the bank’s bond buying in conjunction with Europe’s bailout fund, thus entering into a rescue programme with tough conditions, they rallied the following day as investors concluded that ECB action would happen, albeit on an unknown future date.
The German government is “not worried” by Mr Draghi’s announcement, Georg Streiter, Ms Merkel’s deputy spokesman, told reporters in Berlin yesterday. – (Bloomberg)