Monti Warns Against Backtracking on Bailout Deal (9/27)     Print Email

By Michael Mosettig

Italy's prime minister has fired a warning shot across the bow of three hard-line EU governments that seemed to be backtracking on a  June deal to help Spain and Ireland get their banking crises under control.

Appearing at the Council on Foreign Relations in New York, this morning,  Prime Minister Mario Monti was asked about the Tuesday statement from the finance ministers of Germany, the Netherlands and Finland that said money from the newly-created European Stability Mechanism would not cover "legacy" debt that governments incurred before this year to bail out banks.

The statement, almost ignored in U.S. media,  has caused a small uproar, especially in Ireland. The Irish Times called the finance ministers's statement "a clear attempt to reinterpret --if not rengotiate--" an agreement at the June 29 EU summit to break the link between bank and sovereign debt. Irish Taoiseach (prime minister) Enda Kenny insisted to the parliament (Dail) that the June 29 deal was still on.

And Monti backed up that view, asserting EU nations should "firmly stick" to the summit agreement, as he emphasized the importance of "collective" decisions by EU leaders.  The Prime Minister's remarks were relayed to Washington on a teleconference.

Monti, a one-time Yale University graduate student and EU Commissioner, heads a technocratic government. Speaking in English to his two-city audience, he acknowledged that nothing happens without the assent of France and Germany. He said one of the strengths of European decision-making was that it required the agreement of many other heads of government besides those in Berlin and Paris.

"Italy has a role to play," he asserted, especially drawing the attention of German Chancellor Angela Merkel to "the economic, political and psychological consequences in Europe of traditional economic policy-making."

In his 60-minute sessions, fitted in between meetings and speeches at the United Nations General Assembly, the prime minister said he expected Greece to remain in the Euro common currency. A Greek exit would damage "the concept of irreversibility" of the 17-nation Euro.

To his American interlocutors, he twice expressed fascination with the so-far failed efforts of the U.S. Congress's "super committee" to agree on a debt reduction package. He said there were analogies with his multi-party government to develop a bi-partisan focus on two or three major issues that will be critical for future generations.

Of his own political plans, Monti said he would continue to be available to serve but hoped the April elections it Italy would produce a "clear result" and a government headed by a political leaders.  He did not rule out the possible return of his disgraced predecessor Silvio Berlusconi.

"The degree of his intensity is for him to choose," Monti added.

He reminded the audience that the then-new Prime Minister Berlusconi in 1994 launched Monti's political career by nominating the university president to the EU Commission.

Michael  Mosettig is former Foreign Editor of PBS News Hour and a member of the "European Affairs" Board of Advisors