Monti says Italy may need spread shield
Reforms not reflected in interest rates, says premier01 August, 18:39
(ANSA) - Helsinki, August 1 - Italian Premier Mario Monti on Wednesday said Italy may need to ask for European rescue funds to be used to support its bonds if the money markets contiue to be slow to see the country's efforts to put its economic house in order. "Aid may be necessary as markets are reacting slowly to Italy's efforts and achievements," said Monti, referring to reforms by his technocrat government since taking over from ex-premier Silvio Berlusconi, who resigned amidst economic crisis in November.
He stressed the use of the so-called spread shield would not mean that Italy would need a full-blown bailout.
Monti told the Finnish daily Helsingin Sanomat before meetings with Finnish Prime Minister Jyrki Katainen that he "feels frustration that Italy's painful reforms have not yet been reflected in lower interest rates." Italy does not need special help right now, but that does not mean it will not need a shot of "oxygen" to help it breathe in future, he said. The Italian premier urged his counterparts to work collectively to lower borrowing costs across the region. Monti and other leaders have been pushing for rapid implementation of a June European Union summit agreement that would ease the way for purchase of distressed sovereign-debt with the region's rescue funds. Monti said that he believes the European Union's soon-to-be-launched rescue fund, the European Stability Mechanism (ESM), will eventually have a banking licence to give it more power to fight the eurozone crisis. "I think that giving a banking licence to the ESM would help and I think this will happen in due time," Monti said. Berlin is opposed to giving the ESM a banking licence. Monti also explained the importance of the crisis tools available to European countries, and why these may be needed by "virtuous" countries such as Italy, which have been making concerted efforts domestically to deal with the crisis".
"We are thinking of a possible intervention in various combinations involving the temporary rescue fund, the permanent European Stability Mechanism (ESM) and the European Central Bank," he said. Finland, the most northern member of the eurozone, has taken a very hard line on rescue packages, insisting on strict terms of austerity and collateral before participating. Monti moves on to meet with Spanish Prime Minister Mariano Rajoy on Thursday to discuss stepping up efforts to resolve the crisis. Their meeting will coincide with a session of the ECB, its first meeting since ECB President Mario Draghi cheered markets and heightened expectations after pledging he would do "whatever it takes" to save the euro.