German Chancellor Angela Merkel said that European efforts to resolve the debt crisis are making progress, even as “imbalances” in euro-area economies show that the task is far from complete.
“We’ve come a good way along the mountain path, but we’re not completely over the mountain,” Merkel told reporters in Rome today after talks with Italian Prime Minister Mario Monti. “I suspect that in the next few years there will continue to be new mountains -- there won’t be a celebratory event in which we say we’re over the mountain and now we can sit among the trees and say that we’ve done it.”
Merkel praised Monti’s “bold” efforts since taking office on Nov. 16 to overhaul Italy’s economy, which include 20 billion euros in austerity measures and steps to deregulate services amid surging Italian bond yields that threatened to rip apart the currency region. Aided by European Central Bank liquidity measures, Italian 10-year borrowing costs have fallen to 4.89 percent from a euro-era record of 7.26 percent on Nov. 25.
Monti, a former European Union competition commissioner, said Italy has “arrested” the crisis though not yet overcome it. “Italy still has homework to do,” he said. Italy prefers to rely on its “own strengths” rather than seek any external aid during the worst moments of the crisis.
Monti reiterated Italy’s support for “adequate” financial firewalls for the region. Euro-area finance ministers last night asked the European Commission, which has backed the largest possible rescue pool for distressed member states, to propose options on the region’s firewall before a decision at a March 30-31 meeting in Copenhagen.
Merkel, asked about boosting the region’s crisis-fighting war chest, declined to comment.
Merkel also said that risks lie ahead. “We have these imbalances -- what we’re referring to as the Target2 balances -- they are one of many indicators that we’re not back in full balance,” she said.
The two leaders said they shared the same position on a possible financial-transaction tax, saying it should be applied to all EU countries. They also said they agreed that Europe must start to focus more on economic expansion, with Merkel saying that an EU summit in June will focus on growth.
Monti, asked about the possibility that he could take over from Luxembourg Prime Minister Jean-Claude Juncker as head of the Eurogroup, suggested he was too busy. “Do you think an Italian prime minister has time for other jobs?” he said.
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