Brussels, 11/01/2012 (Agence Europe) - The chancellor of Germany, Angela Merkel, said on Wednesday 11 January after a meeting in Berlin with the Italian prime minister, Mario Monti, that she had great respect for the contents and speed of the new Italian reforms and Italy's efforts to reduce its debt. Her comments were intended to reassure Monti, who is unhappy about the lack of recognition of Italy's achievements from the markets and wants signals to help reduce the high interest rates charged for rolling over the country's debt.
Monti said that the interest rates charged on Italy's debt were unjustifiably high given the achievements made by the Italian economy and the fact that Italy has understood the need for budget discipline (pension reform, for instance). Like Italians in general, he hopes to see a reduction in the yield rates for the country's bonds well ahead of the few quarters that will be needed before today's good decisions are seen in tomorrow's economic growth. Monti said that if Italians did not see a speedy outcome in the near future in terms of growth and jobs in return for all their sacrifices they are making to reassure the markets, then he feared the emergence of populist anti-European movements in the country, he explained in an interview with German newspaper Die Welt ahead of his meeting with Merkel, explaining that Italy was not seeking any handout from Germany, the high priest of economic orthodoxy, but rather recognition that Italy no longer posed a threat to Europe as rating agency Fitch describes the situation in his country as “explosive” and urges Europe to set up a credible firewall for the indebted country.
The German chancellor went some way towards this, saying that particularly important measures to correct public finance and introduce structural reforms had been introduced by the new Italian government, which would improve the country's economic prospects and strengthen it. Italy has made a great step forward, she said, but reforms were still needed to adjust to a rapidly changing world. Merkel said that she, Monti and the French president, Nicolas Sarkozy, would be meeting in Rome on 20 January ahead of the special European summit on 30 January.
Other matters discussed by the two leaders were the European summit on 30 January and the need to promote growth and jobs, with Merkel saying that the EU Structural Funds needed to be used more effectively to properly promote growth and jobs; boosting the European Financial Stability Fund - Merkel commented that Germany was prepared to increase its contribution if other countries followed suit; how the ECB could contribute to the EFSF to make it more operational; and the planned financial transaction tax (Tobin tax). Monti said the best thing would be to have an international tax, but an EU-wide Tobin tax would make sense, and possibly even a eurozone tax. Merkel said she herself favoured the idea, but her coalition only wanted to go ahead if it was introduced by the full EU27. (FG/transl.fl)