Italy's prime minister has pleaded for Germany and other creditor countries to do more to help lower his country's borrowing costs, warning there would be a “powerful backlash” among voters in the eurozone's periphery if they did not.
Mario Monti said he did not dispute the vast majority of the credit rating agency’s diagnosis of Italy’s problems. But he argued the agency’s analysis supported the tack he was taking both at home and in Brussels. He singled out S&P citing “one negative” political risk factor: “European policymaking and political institutions”, not his technocratic government.
Rome would push the German government to realise it was in “its own enlightened self-interest” to lend more of its fiscal weight to lowering borrowing costs of Italy and other highly indebted governments. The single currency had brought “huge benefits …and maybe to Germany even more than others”, he said.
The stance could put Mr Monti, whose appointment to replace Silvio Berlusconi was cheered by German chancellor, Angela Merkel, on a collision course with Berlin. Ms Merkel has been reluctant to take more aggressive action to lower Italy’s euro-era high borrowing costs, such as supporting commonly-backed “eurobonds” or increasing the size of the eurozone’s rescue funds.
Mr Monti insisted his government was cutting expenditure “for the good of future generations of Italians” and not at the behest of Berlin. In return for that fiscal discipline “there has to be a visible improvement somewhere else”, he said. “In a country like Italy now, the ‘somewhere else’ can only be interest rates.”
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