Tue, Aug 21, 2012 - Page 15 News List

Italy’s Monti sees end to crisis, warns on EU divide

AT LAST:The leader of the EU’s third-biggest economy was cautious in his optimism, due to his worries that anti-Germany feelings were breeding schisms within the union

Reuters, RIMINI, Italy and LONDON

Italian Prime Minister Mario Monti is seen on Sunday at the ‘Comunione e liberazione’ (Communion and Liberation) conference in Rimini, Italy.

Photo: EPA

Italian Prime Minister Mario Monti said on Sunday the end of the economic crisis in his country was in sight and that the eurozone must not let the single currency become a source of friction between the north and south in the bloc.

Speaking at a conference in Rimini, he said the eurozone’s third-largest economy was in better shape than a year ago while people were more aware of the difficulties it faces.

“A year ago we thought less than we do today that we were in a crisis, but I believe we were in it more,” Monti said.

He added that he saw the end of the crisis “getting closer in some ways.”

Since taking over from former Italian prime minister Silvio Berlusconi, who stepped down in November last year to avert a Greek-style debt crisis, Monti has embarked on a reform program including labor market and pension overhauls, spending cuts and deregulation.

Monti said his government had not expected its reforms to have immediate growth-stimulating effects on the recession-hit economy.

However, he said he had hoped they would have led to Italy’s borrowing costs falling faster than they have done, which would have made it easier for the recovery to begin.

Monti reiterated his concerns about tensions between northern and southern countries in the eurozone, as the bloc attempts to resolve its economic crisis to keep the single currency intact.

“It would be a major tragedy if the euro, the crown of the European dream of integration and unity ... became a factor of disintegration, of the birth of prejudices, of north against south,” he said.

Monti warned earlier this month in an interview with German magazine Der Spiegel that he was concerned about growing anti-euro, anti-German and anti-EU sentiment in the Italian parliament in Rome, noting the threat of a “psychological break up” in the bloc.

Yesterday, European shares eased after last week’s strong performance, while a report that the European Central Bank (ECB) could set an interest rate threshold for purchases of eurozone bonds helped nudge up the euro and temper demand for German bonds.

The main indexes in the region were little changed with London down 0.04 percent and Paris and Frankfurt also lower.

German government bond futures fell 36 ticks back towards last week’s lows, while Spanish bonds rallied, an indication of a rising appetite for risk.

The slide in Bunds was attributed report in Germany’s Der Spiegel magazine over the weekend that the ECB’s new bond buying plan could include an upper limit on the price of troubled bonds, above which its purchases would kick in.

With many European policymakers on summer holidays, markets have had a respite from negative headlines.

While markets anticipate some conclusive action to calm the eurozone’s troubled bond markets to be announced at the ECB’s Sept. 6 policy meeting, the focus this week is on a meeting between leaders of Greece and Germany on Friday, the same day Spain will give details of its ‘bad bank’ plans.

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