Italian Prime Minister Mario Monti Promises Reform, Says UK Shares Common Vision
Italian Prime Minister Mario Monti insisted that the UK's veto on a key EU treaty in December was "water under the bridge" as he outlined plans to cut his government's deficit and kick-start growth in the heavily-indebted country.
Monti met with David Cameron on Wednesday, and, speaking at a press conference in London, said that the two countries shared a common interest, despite the dramatic and controversial decision by Cameron to pull out of talks aimed at bringing about greater economic integration in the EU and trying to prevent a repeat of the current sovereign debt crisis.
"We, both the UK and Italy, believe that fiscal discipline is a necessary condition for growth. It is not, however, a sufficient condition," Monti said, adding that the individual countries and the European Union as a whole have to play a role in promoting economic growth.
"At the centre of this policy for growth in both our visions lies the single market," Monti said.
Responding to accusations that the UK, which has reportedly been asked to increase its contribution to the International Monetary Fund (IMF) in order to build a financial firewall that could bail out Italy and other struggling sovereigns, Monti said:
"To my knowledge, my country has not cost a penny to the UK so far, nor vice versa, as far as I am aware of… I don't see why this should change in the future.
"I believe that both the UK and Italy are huge beneficiaries of the single market and of European integration."
On the longer term future of the eurozone and the EU, Monti said that the monetary aspects of the Economic and Monetary Union were important, but economic integration needed work.
"The 'M' is key, and needs all the attention that it has received, but the 'E' - economic union - has not always been paid the attention that it probably deserves," he said.
Monti reiterated the Italian government's ambitious plan to reduce its budget deficit to zero by 2013, and promised to push on with reforms to the labour market and the pension system, with further privatisation and liberalisation and with a new focus on tax evasion.
The tax system would be reorganised to target wealth, rather than on productive industries, Monti said.
"This has enhanced Italy's competitiveness, as is remarkably needed," he said.
Monti declined to comment on Friday's downgrade of the country's sovereign rating by Standard & Poor's, "not because I believe it is irrelevant - although the effects on the markets have not been seen - but because I believe that it tells a lot concerning the relative position of Italy. Because in particular, it says that from the point of view of political risk, the assessment of Italy stays stable," he said.
S&P said that there was an improvement in the policy framework since the change of government in Italy, Monti noted.
Monti, a former EU Commissioner, inherited a country struggling to maintain its credibility in international markets after the slow collapse of Silvio Berlusconi's government.
Italy's debt mountain stands at 120% of its GDP, and billions of euros in debt need to be rolled over in the next 12 months. With its cost of borrowing still high - yields on its 10-year debt remain above 6.5% - and its growth prospects slim, the country faces the same problem as much of the developed world, albeit in extremis.
European stocks were buoyed on Wednesday by rumours that the IMF was seeking more than $500bn in extra firepower to help resolve the euro crisis and backstop Italy. However, the rumours, reported by both Bloomberg and CNBC, were denied.