22nd June 2012
Speaking to the Guardian, Monti said that without a successful outcome at next week's summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries." Bond vigilantes would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt."
Monti added: "A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth."
His comments were echoed by the head of the International Monetary Fund, Christine Lagarde, who warned that eurozone countries were undergoing "acute stress" and must integrate their economies much more closely if they wanted to tackle the crisis.
"The IMF believes that a determined and forceful move towards a complete European monetary union should be reaffirmed in order to restore faith in the system. Because as we see it at the moment, the viability of the European monetary system is questioned," Ms Lagarde said.
Friday's mini summit between the ‘big four' will search for ways to achieve a fiscal and banking union within the euro zone. Merkel, however, is expected to resist any pressure for less draconian euro zone fiscal policies or the issuance of common euro zone bonds. And unless Monti can secure major concessions from Germany, Italy's technocrat government risks a parliamentary munity.
"Monti is desperate. Reform fatigue has breached breaking point," said a top Italian official. "There is a feeling here that the euro is basically dead already. Unless Germany offers a road map out of this crisis, Monti is not going to be able to hold it together much longer."
While James Walston, a politics professor at the American University in Rome told Reuters that: "Monti knows he has to get his ducks in a row on the European side so he can tell the parties that he's sorted that part out, and now it's their turn to help sort out Italy."
"Friday's summit is important for Monti in symbolic terms because it shows Italians that he is centre-stage."
The PM's hand was also weakened by his predecessor, Silvio Berlusconi, who said his PdL party would hold a forum in July with "nobel prize winners" on whether Italy should return to the lira. "It is not blasphemy to talk of leaving the euro," he said.
Berlusconi said the eurozone's weaker countries may have to return to national currencies if Berlin refuses to let the European Central Bank back-stop the eurozone financial system.
"It would have its advantages, because devaluation would allow us to export more," he said. "We will finish up in a worsening recessionary spiral if we keep going with Mrs Merkel's policies."
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