Monti calls for drop in borrowing costs

ROME - Agence France-Presse

French President François Hollande (L) and Italian Prime Minister Mario Monti pose for cameras in Rome before a crucial meeting on the European economy. AFP photo

Italian Prime Minister Mario Monti called on the European Union on Tuesday to recognise efforts made by countries to overcome the economic crisis by moving to bring down punishing borrowing costs.

“As (countries) get economic policies underway, the EU must acknowledge it in order to put a stop to the serious obstacle of spreads that have no reference to the economy’s health,” he said after talks with French President François Hollande.

The difference in the borrowing costs, known as a spread, between struggling countries such as Italy and Spain and those of financially stable Germany widened to record levels earlier this year as worried bond investors decided to lower their risk.
 
While it is necessary that countries “do their homework, it is not sufficient,” Monti said. Italy has imposed austerity measures and passed a wide range of reforms but is still vulnerable to punishment on the markets.
 
The French President and Monti repeated their intention to push hard for the implementation of measures adopted at the European summit in June, and briefly touched on some of the latest developments in the eurozone economic crisis. Hollande reiterated his hope for clear decisions to be taken on Greece and Spain, two of the most vulnerable countries in the eurozone, at an October summit in Brussels, and laid out a three-point plan to tackle the crisis.

“We have identified three stages for the eurozone: implementing the decisions of the European Council, resolving the problems in Greece and Spain and create a banking union,” he said. Spain’s plight has once again risen to the forefront of the three-year crisis and Greek leaders are scrambling to unlock crucial loans -- threatening to increase fears once more of a eurozone inching towards a possible collapse.

The meeting with the French President in Rome came just two days before a key European Central Bank meeting at which the central bank may announce a new round of sovereign bond purchases to ease borrowing costs for struggling countries.