President Barack Obama said Europe needs a stronger firewall to prevent the debt crisis from spreading and a plan for economic growth, as he lauded “very effective” steps Italy has taken.
Obama spoke after meeting at the White House with Italian Prime Minister Mario Monti. Monti, who took over from Silvio Berlusconi in November, is on a two-day visit to New York and Washington to persuade investors that Italy can tame its $2.5 trillion debt by combining budget cuts with deregulation.
Monti has taken “very effective measures” to deal with Italy’s debt, Obama said, adding that he has “great confidence” in the prime minister. Obama said Monti has “boosted confidence within Italy about a reform agenda” and is generating “confidence throughout Europe and in the marketplace.”
Obama said he and Monti agreed on “the need for a stronger European firewall that will allow for a more stable path for more repayment of debt but also the promotion of a growth strategy.”
Monti, speaking in English, said he and Obama “agreed on the strategy in order for Europe to consolidate its budgetary position, to cope with the financial tensions” and to put in place “adequate firewalls” while recognizing the “imperative” of growth through structural transformation of the European system.
Monti said the U.S. “is the leading example of what a single market can provide in terms of growth” and that “Europe’s programs for growth should rely heavily on an enhanced effort” toward greater market unification.
Italy’s debt is bigger than that of Spain, Portugal, Greece and Ireland combined and about four times larger than Europe’s rescue fund. Monti’s success may be vital to reducing Italian borrowing costs and preventing the euro region from breaking up.
Even as employers in the U.S. are adding jobs and growth accelerated in the fourth quarter to a 2.8 percent rate, the fastest in 18 months, the economy remains vulnerable to risks posed by the European debt crisis.
The euro zone’s $12.1 trillion annual economic output is the world’s largest after the $14.6 trillion U.S. production and compares with $5.9 trillion for China, which is third, according to data compiled by Bloomberg. The 27-nation European Union was the second-biggest destination for U.S. goods exports in 2010, behind Canada.
Following passage of Monti’s austerity bill in December, which overhauled pensions and raised taxes on gasoline and primary residences, his Cabinet approved legislation on Jan. 20 to boost competition among so-called closed professions such as notaries and pharmacists. A week later, the Cabinet abolished or loosened regulations in a bid to cut red tape and make it easier to do business.
At the same time, Monti has pushed back against Chancellor Angela Merkel and Germany’s insistence on austerity measures as a panacea for the debt crisis.
Ronald Spogli, U.S. ambassador to Italy from 2005 to 2009, said in a phone interview that to cut Italy’s debt, Monti knows his country “desperately needs growth.”
Obama, in an interview that appeared in Italy’s “La Stampa” newspaper and on its English-language website today, said that “Europe has the economic and financial capacity to overcome this challenge.”
“What is necessary now is for all European governments to show their absolute commitment to the future of economic integration in Europe,” Obama said.