Italian PM says eurozone 'credibility' gap rattled markets
Mario Monti - Photo EC
(AIX EN PROVENCE) - Italian Prime Minister Mario Monti denounced unnamed "northern" EU states on Sunday for taking positions that contributed to spikes in borrowing costs for Italy and Spain.
In a clear reference to Finland and The Netherlands, which questioned some decisions made at the June 28-29 EU summit hailed as a watershed for the debt crisis, Monti said the unnamed countries were sapping the eurozone's "credibility".
The hard-won accord in Brussels paves the way for a 500 billion euro ($630 billion) bailout fund to recapitalise ailing banks directly, without passing through national budgets and thus adding to struggling countries' debt mountains.
However borrowing rates for 10-year bonds in Spain and Italy shot up to unsustainable levels Friday, with the Spanish yield hovering around 7.0 percent.
They came after lower rates due to initial market euphoria after the EU summit promised fresh capital for Spain's struggling banks and a European bank union to keep lenders in line.
Finland has said it has no intention of footing the bill to cover the debts of other eurozone countries.
"Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for," Finance Minister Jutta Urpilainen said in a newspaper interview.
Dutch Central Bank president Klaas Knot, a member of the European Central Bank's governing council, took a similar line, saying: "If somebody wants to help southern Europe, then it has to be other governments, not the ECB."
Speaking on the sidelines of an economic conference in this southern French town, Monti said he wanted the Eurogroup to effect the decisions of the earlier summit "rapidly in operational terms."
The Eurogroup of eurozone finance ministers will meet in Brussels on Monday and again on July 20, according to French Finance Minister Pierre Moscovici.
The French minister, who met with Monti earlier Sunday, said "one has to go further" to help Spanish banks and "move quickly" on tighter banking regulations to speed up bailouts to struggling lenders.
He said he had "very convergent views" with Monti. "We have very confident relations that are going in the same direction."
Moscovici also said France wanted Jean-Claude Juncker to stay on as Eurogroup president "for some time" until a "possibly more lasting solution" can be found to the debt crisis.
The German weekly Der Spiegel reported that Paris and Berlin had reached a compromise whereby German Finance Minister Wolfgang Schaeuble would head the group of EU finance ministers for the next year, and Moscovici would take it on the following year.
"I don't know where this rumour came from, but for now it is not on the cards," Moscovici said, adding that the Eurogroup was set to make a number of appointments on Monday including a successor to Juncker.
France has not hidden its reluctance to see Schaeuble take the helm of the Eurogroup and has been more openly backing an extension for Juncker, who has held the post since 2005.