A majority of European Union leaders at a Brussels summit this week backed joint euro-area bonds, and Italy can help persuade Germany to support Europe’s “common good” as well, Italian Prime Minister Mario Monti said.
“Europe can have euro bonds soon,” Monti said in an interview on Italian television station La7 yesterday. Germany has an interest in ensuring no country leaves the euro, while Greece will probably remain in the 17-nation currency region even as “anything can happen,” he said in the interview.
Monti’s account of the meeting contrasted with that of Luxembourg Prime Minister Jean-Claude Juncker, who told reporters in Brussels that joint debt sales “didn’t find much support,” particularly in the German-speaking area, while the French-speaking area was more enthusiastic.
Monti spoke after the summit of the EU’s 27 leaders ended early yesterday with an exhortation to Greek voters to elect a pro-austerity government on June 17 that makes the budget cuts needed to keep the financially ravaged country in the euro.
“If Italy one day left the euro and reacquired its own autonomous currency, with interest-rate freedom, and the new lira was devalued, it would be a huge problem for Germany’s exports,” Monti said. “And it would also be a major problem for Italy.”
U.S. stocks ended the session higher after Monti’s remarks, while the euro slipped to an almost two-year low. The Standard & Poor’s 500 (SPX) Index added 0.1 percent to 1,320.68 at 4 p.m. in New York yesterday after slipping as much as 0.6 percent. The euro fell 0.4 percent to $1.2535 at 3:54 p.m. New York time after touching $1.2516, the weakest since July 6, 2010.
‘In Germany’s Interest’
“A united Europe is in Germany’s interest,” Monti said. “We’ll have euro bonds if the euro area, and therefore Germany, will want them.”
Greece’s next government must live up to its bailout pledges as easing the terms would create a moral-hazard risk, the Italian leader also said in the interview.
“Clearly, if Europe says that we’ll ease the terms, then it’s a gift to the most extreme political forces and penalizes the biggest parties,” Monti said. “Then others such as Portugal would expect the same thing.”
Italy’s economy has grown less than half the euro-area average for more than a decade. Italians, mired in their fourth recession since 2001, “may wonder where the benefits of the euro are,” Monti said, though “they are probably not nostalgic for the lira.”
To contact the editor responsible for this story: Craig Stirling at email@example.com