Napolitano says Italian banks solid, praises Monti
President says spread 'inexplicable'05 September, 15:03
Abroad there is greater "trust in the financial sustainability of Italy, in its basic solidity and in its banking system, which is even stronger than those of important and virtuous countries," Napolitano said in the northern Italian town of Merano, where he was meeting with Austria's President Heinz Fischer.
Napolitano gave credit to technocrat Premier Mario Monti for restoring Italy's credibility.
"There is no doubt that there has been a great renewal of faith in Italy, which is also thanks to Mario Monti's personality," Napolitano said.
Economist Monti replaced Silvio Berlusconi at the helm of government during a bond spread crisis in last November with a mandate to restore Italy's finances and standing, to take necessary but painful reform measures elected political leaders had failed to do.
Napolitano also called the spread between Italian and German bonds "absolutely inexplicable" on Wednesday.
"Certainly it is true what the recent Bank of Italy document says, that the current level of the spread between Italian and German bonds, in particular 10-year (bonds), is absolutely inexplicable on the basis of fundamentals of the Italian economy," Napolitano said. "There is a conspicuous excess that represents a problem not only for Italy but also for the functioning of the euro," Napolitano added.
Napolitano cited European Central Bank President Mario Draghi, saying "when markets are fragmented or influenced by irrational fear, monetary policy cannot work".
Napolitano said that the ECB was working on provisions that should be formalized in a board meeting Thursday. The ECB is working on drafting a mechanism to buy bonds in the secondary market to lower the borrowing costs of countries at the centre of the eurozone crisis, such as Spain and Italy.