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German Chancellor Angela Merkel said
Wednesday that she had "great respect" for recent economic reforms passed
by Italy's interim government, stressing to Prime Minister Mario Monti in Berlin
that Rome would be "rewarded" for them as the crisis-hit country
struggles to cut its debt. She also said that the German government was ready to
accelerate the introduction of the €500bn European Stability Mechanism - - the
permanent Eurozone rescue fund - - and “to perhaps pay
in more capital at the start … if the others are ready to do it.”
"I think [the reforms] will strengthen
Italy, will improve its economic prospects and we have watched with great
respect how quickly they have been implemented,"
Merkel told journalists at the Chancellery after meeting Monti.
"I think that, overall, the work of the
Italian government will be rewarded and I have said from the beginning that we
should work very, very closely together," she added.
Monti said he hoped that "the implementation
of good policies would translate to sensible rates" as Italy's borrowing
costs remained above the critical seven-percent mark seen as unsustainable.
He had complained in man interview with the
German daily Die Welt of possible "anti-European" protests in his country
if Rome's reform efforts were not recognized adequately.
"The problem is that despite our
sacrifices, we have not got anything in return from the European Union, such as
a drop in interest rates. Unfortunately, we have to say that our reform policies
have not received the recognition and appreciation in Europe that they deserve,"
Italians received a boost on Wednesday from data
showing the country's public deficit had fallen to its lowest level since the
fourth quarter of 2008, according to the Istat data agency.
Rome has pledged to balance its budget by 2013.
At present, Italy's total accumulated debt is over €1.9trn, or 120% of GDP.
The talks exceeded the 90 minutes set aside for
the meeting, which Merkel said had been “a very important exchange.”
“It took a little longer not because we
quarrelled but because we had a lot to discuss.” She
said Rome and Berlin now had “very good co-operation.”
Draft fiscal treaty
copy of the draft EU fiscal treaty [pdf] seen by Reuters will only allow
Eurozone countries to incur budget deficits during severe economic downturns or
other exceptional events.
The latest draft sets out more clearly when the
Eurozone would tolerate a deviation from a budget in balance or in surplus,
termed the medium-term objective.
"Temporary deviation from the medium-term
objective will only be allowed in cases of an unusual event outside the control
of the contracting party with a major impact on the financial position of the
general government or in periods of severe economic downturn for the euro area,
the EU or the concerned contracting party," the draft document says.
The balanced budget rule, which demands
governments balance their budgets over the economic cycle, is central to the new
treaty and the draft sets a provisional timeline for the entry into force of the
new regime by the start of next year.
Importantly for Ireland, the draft says it's not
necessary to incorporate the balanced budget rule in the Constitution: "NOTING
that compliance with the obligation to transpose the 'Balanced Budget Rule' into
national legal systems through binding and permanent provisions, preferably
constitutional, should be subject to the jurisdiction of the Court of Justice of
the European Union, in accordance with Article 273 of the Treaty on the
Functioning of the European Union."
The draft also removes a controversial reference
to deeper integration in the single market among those who sign up to the pact.
Up to 26 EU countries are expected to back the
Spain to borrow less this year
Spain's economy ministry said today that it plans
to borrow €86bn on financial markets in 2012, down from 2011.
This gross figure is almost €10bn less than the
€95.6bn raised by issuing sovereign debt in 2011, said the Treasury. T
Spain's first debt issue of 2012 takes place on
Thursday, when the government hopes to raise between €4bn and €5bn in three- and
Banks' ECB cash sets another record
Figures from the ECB today show that Eurozone
banks deposited a record sum with the European Central Bank, suggesting
reluctance to lend.
Banks put €485.9bn with the ECB on deposit for 24
hours, beating the record set the previous day.
Lenders gain an interest rate of 0.25% for their
cash deposited at the ECB, less than they would receive on the interbank market.
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