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July 31, 2021

Merkel and Sarkozy have planned a Stability Pact for Italy

Euro may not survive until Christmas, former EBRD President Jacques Attali says. Commissioner Olli Rehn said: “I certainly do not see a trend indicating the fall of the euro.”

German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning drastic measures, including a quick new Stability Pact, to fight the euro zone sovereign debt crisis, Mediafax informs, quoting Reuters. Moreover, Germany and France were ready to join a number of countries in agreeing to tough budget discipline. The article, originated in Welt am Sonntag, quoted German government sources as saying that the crisis fighting plan could possibly be announced by Merkel and Sarkozy in the coming week. The report said that because it would take too long to change existing European Union treaties, euro zone countries should avoid such delays be agreeing to a new Stability Pact among themselves – possibly implemented at the start of 2012.

Therefore, it could be similar to the Schengen Agreement that allows for uninhibited cross border travel for citizens in countries that take part. Among the countries in the Stability Pact there would be a treaty spelling out strict deficit rules and control rights for national budgets.

The European Central Bank (ECB) should also emerge more as a crisis fighter in the euro zone. In Brussels on Friday, euro zone officials said a push by euro zone countries toward very close fiscal integration could give the ECB the necessary room for maneuver to scale up euro zone bond purchases and stabilize markets. The ECB, which cannot directly finance governments, has been buying Italian and Spanish bonds on the secondary market since August to try to keep down borrowing costs for the euro zone’s third and fourth largest economies and contain the spreading of Europe’s sovereign debt problem.

The euro may not survive until this Christmas if the EU doesn’t undertake sufficient anti-crisis measures, the leading economist and the former President of the European Bank for Reconstruction and Development, Jacques Attali, stated on Saturday, the Voice of Russia informs. He believes that the collapse may be avoided if the ECB buys off the troublemakers’ state bonds and limits their financial sovereignty by imposing supranational control over their budgets.

As a response, the vice president of the EU Commission and Commissioner for Economic and Monetary Affairs Olli Rehn said: “I certainly do not see a trend indicating the fall of the euro”. “Eurozone leaders have said they will do all that is necessary to guarantee stability in the area,” added Rehn, “and we are working on implementing the decisions taken. There will be a European summit in the coming days.” Rehn added.

On the other hand, Merkel and Sarkozy agreed with Prime Minister Mario Monti that Italy succumbing to the region’s debt crisis would lead to the end of the euro, Monti’s office said, businessweek.com informs. The two officials confirmed their support for Italy, saying that they are aware that the collapse of Italy would inevitably lead to the end of the euro.

Italy has been forced to pay record interest rates in a EUR10bn auction of treasury bills, BBC informs. The rate of interest for the new debts due to be repaid in six months was 6.504 per cent, compared with 3.535 per cent in the last comparable sale on 26 October. The rate for two-year borrowing was 7.814 per cent, up from 4.628 per cent last time. The Bank of Italy stressed that demand for the bonds had been high, with demand for the debts outstripping supply by 50 per cent. But the European Economic and Monetary Affairs Commissioner Olli Rehn dismissed the idea that the eurozone crisis could lead to a break up of the single currency. Italy plans to sell another EUR 8bn at an auction on Tuesday.

Moreover, Romanian Prime Minister, Emil Boc said that eurozone could reach its end if the political leaders will not take drastic measures for solving the problem and take responsibility for the populist measures that they used in order to receive votes.

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