Rome/Berlin: Italy’s prime minister urged European policymakers on Friday to beware of dividing the continent with their efforts to fight its debt crisis, warning against a “short-term hunger for rigour” in some countries, in a swipe at Germany.
German Chancellor Angela Merkel gained some respite from domestic pressure for a tougher line in the euro zone crisis when eurosceptics hostile to more bailouts lost a referendum in her junior coalition partner, the Free Democrats, aimed at blocking a permanent rescue fund.
Call for unity: Italian Prime Minister Mario Monti. Photo: Tony Gentile/Reuters
Merkel—under pressure from the revered Deutsche Bundesbank to force debt-saddled euro zone countries to reform and save their way out of crisis with austerity measures—has led a push for automatic sanctions for deficit “sinners” in the bloc.
This has fed concerns that excessive belt-tightening in southern countries could send their economies into a negative spiral with no prospect of growing out of the crisis, while feeding resentment in the prosperous north.
Italian Prime Minister Mario Monti said Europe’s response to the debt crisis “should be wrapped in a long-term sustainable approach, not just to feed short-term hunger for rigour in some countries.
“To help European construction evolve in a way that unites, not divides, we cannot afford that the crisis in the euro zone brings us...the risk of conflicts between the virtuous North and an allegedly vicious South,” he told a conference in Rome.
The head of Italy’s largest labour federation—Italian General Confederation of Labour —said on Wednesday the country risks a “social explosion” over austerity measures, and unions plan more protests against them.
In Germany, turnout fell short of the necessary quorum of one-third of the Free Democratic Party’s (FDP) membership, and only 44.2% voted for dissident lawmaker Frank Schaeffler’s motion against the planned european stability mechanism.
A victory for the eurosceptics could have brought down Merkel’s centre-right coalition, but the outcome still left the FDP split, with its public support in tatters.
The euro held steady above $1.30 on Friday and Spanish and Italian bonds rallied even though investors remain nervous of a possible Standard & Poor’s credit rating downgrade of several euro zone countries, including AAA-rated France.