You're reading: Merkel, Monti: will do all to protect eurozone

BERLIN — The German and Italian leaders have pledged to do everything to protect the eurozone, the German government said Sunday — further underlining European politicians' determination to get a grip on the continent's debt crisis, but again offering no details of any action.

Chancellor Angela Merkel
and Premier Mario Monti spoke by phone Saturday and “agreed that Germany
and Italy will do everything to protect the eurozone,” German
government spokesman Georg Streiter said in a statement.

That was
near-identical to the wording of a statement issued Friday by Merkel and
French President Francois Hollande, which in turn came a day after
Mario Draghi, president of the European Central Bank, said the ECB would
do “whatever it takes” to preserve the euro.

None of the leaders
have said anything about any specific action. But the comments raised
expectations that the ECB might step in to buy Spanish and perhaps
Italian government bonds to lower the countries’ borrowing costs, which
have been worryingly high in recent weeks.

Another possibility
might be for the eurozone’s temporary rescue fund, the European
Financial Stability Facility, to buy bonds — though Merkel’s finance
minister, Wolfgang Schaeuble, has dismissed talk Spain might apply to
the fund for such help. He told the Welt am Sonntag newspaper that
“there is nothing to this speculation.”

Italy and Spain have the eurozone’s third- and fourth-biggest economies respectively, behind Germany and France.

Merkel
and Monti agreed that decisions made by last month’s European Union
summit “must be implemented as quickly as possible,” Streiter said,
again echoing Friday’s Merkel-Hollande statement.

Those included
allowing Europe’s bailout fund — once a new, independent bank supervisor
is set up — to give money directly to a country’s banks, rather than
via the government. Countries that pledge to implement reforms demanded
by the EU’s executive Commission also would be able to tap rescue funds
without having to go through the kind of tough austerity measures
demanded of Greece, Portugal and Ireland.

Merkel invited Monti to visit Berlin in the second half of August and he accepted the invitation, the German government said.

The
assurances come as concern flares again about Greece. International
debt inspectors are scrutinizing Greece’s finances and its progress in
implementing unpopular budget cuts and reforms demanded in exchange for
the rescue loan program that is keeping the country afloat.

Greek
officials have called for more time to implement the measures, but
patience among creditors is running short. If the inspectors’ report,
expected in September, is damning, Athens could stop receiving loans and
face bankruptcy and an exit from the 17-nation euro.

“The aid
program is already very accommodating. I cannot see that there is still
scope for further concessions,” Germany’s Schaeuble was quoted as
telling Welt am Sonntag.

As part of its austerity efforts, Greece
has achieved a remarkable reduction of its budget deficit from 15.8
percent in 2009 to 9.1 percent last year. However, the country is
considerably off-target in other areas of reform.

Athens largely
blames this on a deeper-than-anticipated recession. However, a political
crisis sparked by fierce rivalry between Greece’s main political
parties stalled the reforms for three months, and a three-party
coalition finally emerged in June after two inconclusive elections.

Schaeuble
said that “the problem did not arise because of flaws in the (rescue)
program but because it was insufficiently implemented by Greece.”

“It doesn’t help to speculate now about more money or more time,” he said.

Germany’s
vice chancellor, Economy Minister Philipp Roesler, openly questioned
last week whether Greece would satisfy the conditions to receive further
aid and said the prospect of a Greek exit from the euro has “lost its
horror.” He defended those comments in an interview broadcast Sunday.

“There
can be no discounts on reforms,” he told Deutschlandfunk radio. “And
that means: no further payments if the reforms are not fulfilled.”