Brussels, 24/10/2011 (Agence Europe) - Italian Prime Minister Sivio Berlusconi revealed in the evening of Sunday 23 October, that eurozone leaders had discussed the possibility of setting a common retirement age across the euro area. “Within the framework of better governance of the eurozone, we spoke about a common retirement age”, he said, speaking of 67 as a possibility. The Italian government will meet on Monday to discuss this issue but, Berlusconi said, the amount of pensions will not be affected in any way.
The Italian prime minister conceded that Italy could speed up reduction of its public debt, which is equivalent to 120% of national GDP “by selling public assets”. He pointed out that the fundamentals of the Italian economy are sound: the public deficit is the lowest after Germany's, the country's banks are solid, the public-private debt aggregation has been brought under control, and the housing market has not weakened. He suggested that “the negative attitude with regard to Italy does not reflect the real situation” in the Italian economy.
European leaders have called for reassurance from Italy that it will be able to implement the reforms already agreed, or perhaps even announce further measures to stimulate the economy (see related article). “By Wednesday, member states will have to convince their colleagues that they will implement the promised measures”, said Council President Herman Van Rompuy. He refused to countenance the possibility that any country in difficulty make insufficient commitments. He was asked which other countries were involved. Not Belgium, he stated. “Of course commitments will be made. All member stats must send out clear signals on their commitments”, said European Commission President José Manuel Durão Barroso. He said the discussions among the 17 eurozone members had confirmed that they were all in favour of budgetary consolidation and structural reforms.
Eurozone leaders pursued negotiations on Sunday evening to find a comprehensive solution to the sovereign debt crisis (see related article). Final decisions will be announced on Wednesday 26 October after two further summits, one with all 27 member states and the other with the 17 eurozone members. Council President Herman Van Rompuy spoke of agreement on the objectives, with discussion to continue on how to achieve them. For once, the eurozone is focusing on what is important, said Irish Prime Minister Enda Kenny, who left “more optimistic than this morning” about the ability of the EU to find a solution.
The European strategy is based on five closely related elements: - sustainable public finances to boost growth and speed up structural reforms; - a lasting solution to the Greek budgetary situation, the second Greek bail-out providing for private sector involvement; - restoration of confidence in the European banking sector; - maximising the European Financial Stability Facility (EFSF); - better economic governance and increased eurozone integration. “We need to make the monetary union an economic union, too. That is a lesson to be learnt from the crisis”, stated Barroso.
EFSF: How can the European rescue fund maximise its force de frappe? Herman Van Rompuy said that “two models” had been defined and could be combined to bring about a “cumulated effect”. At a proposal from Germany, the eurozone countries are working on a mechanism that would allow the European fund to provide guarantees for part of the most risky sovereign bonds. Also being studied is increased involvement by the International Monetary Fund. Earlier in the day, German Chancellor Angela Merkel had underlined that making the very best use of the European firewall did not provide for the creation of a link between the European Central Bank and the EFSF. Van Rompuy toned this down by saying it would be going too far to say that the ECB is not a payee.
Greece. The second Greek bailout, finalised end July, requires revision due to the worsening of the recession in the country and a worsening of the sovereign debt markets of countries in difficulty (see EUROPE 10424). In order to put the Greek public debt back on a sustainable course, private sector involvement is needed. Greece's Prime Minister Georges Papandreou said that never in the history of Europe has any country been forced to carry such a heavy burden. Greece is implementing reform but “that takes time”, he added. On the question of debt, the country needs a “viable solution with the help of the private sector”, that is able to “restore credibility”. Europeans are now reflecting on a 50% haircut to the value of Greek bonds.
ECB. On the subject of the diplomatic wrangling between France and Italy regarding the composition of the ECB executive board, the head of the Italian government expressed the hope that Lorenzo Bini Smaghi would understand he cannot be an obstacle to the appointment of a French national. France had given its support to the nomination of the governor of Banca d'Italia, Mario Draghi, to the helm of the European Central Bank, on condition that Bini Smaghi leaves his post to be succeeded by a French national. (MB/MD/FG/DD/transl.rt/jl)