ROME – Italian Premier Mario Monti opened a critical first full week in office Monday, with meetings planned with key European officials to map out strategy for dealing with the country’s debt crisis.
Monti presided over his first working Cabinet meeting after his new government won parliamentary backing last week to try to rein in Italy’s high debt and boost economic growth.
On Tuesday, he heads to Brussels for a first meeting with European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy. And on Thursday he is due to join German Chancellor Angela Merkel and French President Nicholas Sarkozy in Strasbourg for what Monti has said will be a permanent club of the eurozone’s three largest economies to confront the debt crisis.
Monti is under enormous pressure to boost Italy’s stagnant growth and bring down high debt, which at 120 per cent of GDP is among the highest in the eurozone. The aim is not only to save Italy from succumbing to the debt crisis but to prevent a catastrophic disintegration of the common euro currency.
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Monti was tapped last week to lead after Italy’s spiraling financial crisis brought down media mogul Silvio Berlusconi’s 3 1/2 year-old government. Monti’s government of professors, bankers and business executives won back-to-back confidence votes in Parliament.
Yet debt worries continued to stalk the eurozone Monday, with Italy’s 10-year bond yield up 0.09 percentage points at 6.64 per cent while stocks were down 4.5 per cent on the Milan stock index.
Europe has already bailed out three small countries – Greece, Ireland and Portugal – but the Italian economy, the third-largest in the 17-nation eurozone, is too big for Europe to rescue.
The European Central Bank has been buying up Italian government bonds in a bid to keep borrowing rates down. The ECB said Monday its purchases picked up last week to nearly €8 billion ($10.8 billion), up from €4.48 billion the previous week.
The ECB doesn’t break down what countries’ bonds it buys, but traders say it focuses on Italy to keep the country’s markets stable.
No details were released from the nearly two-hour cabinet meeting Monti chaired, other than that the ministers approved a decree concerning the administrative functions of the capital, Rome.
Monti has said the ministers were due to discuss some of his key reform proposals. He has pledged to reform the pension system, re-impose a tax on homes annulled by Berlusconi’s government, fight tax evasion, streamline civil court proceedings, get more women and youth into the work force and cut political costs.
While he hasn’t given any specific timeframe, he has said the government would decide “in the coming weeks” what new austerity measures are needed.