“It’s far from true that there will be a Greek default. I believe there will not be,” he said today in an interview with CNBC television. “Default or not, I don’t see Greece leaving the euro.”
He said that Italy’s fate is no longer seen as linked to that of Greece and that investors should not be concerned that economic changes his government is implementing will be undone when he leaves power next year.
Monti said that the European Central Bank’s decision to extend unlimited three-year loans to banks is a “smart move” and “perfectly inside the mandate.” The lending is easing concerns about bank funding and allowing banks to buy more sovereign debt, creating a “virtuous” circle that has brought down bond yields.
The yield on Italy’s benchmark 10-year bond has fallen by 118 basis points to 5.61 percent since the ECB extended 489 billion euros ($645 billion) in three-year loans on Dec. 21.
Monti also urged all Europeans who share the common currency to approach Greece’s fiscal problems constructively.
“It would be a terrible paradox if the euro, which was meant to unite us, further were to become a divisive innovation,” Monti said on CNBC. “This division is to some extent occurring, unfortunately, in terms of mindset, in terms of antagonizing different countries, in terms of resentment.”
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