Finance

Finance

Italian PM blames Germany, France for Euro debt crisis

28 March 2012 13:18 (UTC +04:00)

Baku - APA-Economics. Italian Prime Minister Mario Monti on Wednesday said the root of Europe’s debt woes lay partly in the irresponsible parenting of Germany and France during the bloc’s infancy, AFP reported.

Monti told reporters in Tokyo that because the eurozone’s two largest players had not abided by fiscal rules, they had set a bad example for the rest of the continent.

"The story goes back to 2003 (and) the still almost infant life of the euro," Monti said.

"It was in fact Germany and France that were loose concerning the public deficits and debts."

The widely-respected technocrat, who replaced billionaire media magnate Silvio Berlusconi in November as head of the EU’s third largest economy, said the flouting of rules allowing for an annual budget deficit of no more than three percent of GDP was the issue.

He said despite recommendations, a meeting of ministers from European Union governments had decided not to punish France and Germany for going beyond the deficit limit.

"So the two largest countries in the eurozone had the (deficit) with complicity of Italy, which was then chairing under the rotation system the council of prime ministers of European Union.

"Of course if the father and mother of the eurozone are violating the rules, you could not expect .. (countries such as) Greece to be compliant."

Monti, who was speaking during a visit to Japan, was a member of the European Commission in the early 2000s when it recommended sanctions be levied against countries that were running over-the-top deficits.

The European Council -- composed of elected politicians -- vetoed the move.

Monti’s visit to Japan comes as Europe continues to stagger under the weight of runaway sovereign debt, with Greece at the forefront.

The eurozone is under pressure to boost the firepower of its debt rescue fund, with the 34-nation OECD on Tuesday pressing for a safety net of at least 1.0 trillion euros ($1.33 trillion).

Eurozone finance ministers are meeting on Friday and Saturday in Copenhagen to decide whether to increase the size of their debt rescue mechanism amid resurgent concerns about the financial health of Spain.

The OECD said the refinancing needs of vulnerable eurozone nations could top 1.0 trillion euros over the coming two years, on top of cash needed to recapitalise banks.

Italy alone needs some 750 billion euros to finance its debt, while Spain requires around 370 billion euros over the next three years.