Monti warns of protests if austerity yields no benefits
ITALIAN PRIME minister Mario Monti has warned that a “protest against Europe” and German “intolerance” in the EU is likely unless the benefits of austerity measures soon become apparent.
Italy’s technocratic leader urged markets to reward Rome’s austerity efforts, and Italian citizens’ “mature” acceptance of reforms, with lower interest rates.
On the debate over a financial transaction tax in Europe, he suggested it only made sense at the level of the EU 27.
Chancellor Merkel said progress on the tax debate was unlikely before March, making it likely that French president Nicolas Sarkozy will be alone in pushing the plan until then.
Yesterday’s warning of “protest” from Prof Monti, a former European commissioner who describes himself as “Italy’s most German economist”, is likely to hit its mark in Berlin.
At a press conference during his first official visit to Berlin, Mr Monti brushed off politely Dr Merkel’s praise for Italy’s austerity measures, saying Italy was not looking for praise but recognition, through lower borrowing costs.
Interest rates on Italian bonds remain about 7 per cent, considered unsustainable by some analysts. “If Italians feel no tangible benefits for their readiness for austerity and reform, a protest against Europe will develop – against Germany, which is seen as the ringleader of EU intolerance, and against the European Central Bank,” said Mr Monti to Die Welt newspaper ahead of yesterday’s visit.
“I can only demand heavy sacrifices from Italians if concrete benefits become clear.” Mr Monti said the uncertainty in Europe was “not a crisis of the euro . . . or a result of a defect in the European model” but a crisis from the US.
“Such a crisis could never have been created in Europe,” he said. “Europe is, virtually speaking, in an excellent condition.” In a nod to his predecessor, Silvio Berlusconi, Mr Monti said Europe “no longer has to fear Italy as a possible source of contagion” but as a constructive partner in European reform efforts. To that end, he will host Dr Merkel and president Sarkozy in Rome on Friday week.
Mr Monti said his government was open to discussing a financial transaction tax in all EU countries but expressed doubts that it made sense within the 17-member euro zone.
He recalled how economist James Tobin, a former mentor at Yale University, once likened the debate over a tax that often bears his name to the “Loch Ness monster . . . that disappears, then reappears”.
Chancellor Merkel said Berlin was ready to consider front-loading “somewhat more capital” into the ESM crisis mechanism when it launches later this year, if other countries did the same.
She defended Germany’s motivation for pushing European reform and austerity, describing it as the key to the continent’s future competitiveness.
“It’s not about ‘we Germans like to save, so all others should have to, too’,” she said. “We are doing this not to torture each other, but so we are a strong continent where investors come and where we can say: ‘We believe in the future!’ That is my creed. That’s why we’re doing this.”