Monti begs Merkel for aid as leaders press for Tobin tax

Tim Wallace
Follow Tim
ITALIAN Prime Minister Mario Monti wants Germany to take more action to support Eurozone countries with their debts, in an attempt to push down Italy’s borrowing costs and ease the pressure on his government.

French President Nicolas Sarkozy and Spanish Prime Minister Mariano Rajoy joined Monti in criticising Standard & Poor’s, which downgraded all three countries on Friday.

Monti (pictured right) claimed yesterday that Italy has taken enough action on its debts and economic reforms to make a difference to the country’s, and the Eurozone’s, long term stability and that such steps should be recognised by markets and other governments.

“The more these [high debt] countries show to have concretely understood the imperatives of discipline, the more Germany should feel relaxed,” Monti told the Financial Times, arguing that while the previous government, under Berlusconi, had backed off from reforms when help was offered, such moral hazard is not such a risk with his technocratic government.

Meanwhile Sarkozy visited Spain to meet Rajoy, and both argued that their countries’ credit rating downgrades from Standard & Poor’s on Friday would not dictate fiscal policies.

“Economic policies are not set on a day-to-day basis, and I do not intend to take into account what the agency says,” Sarkozy told a press conference.

“The downgrade does not change anything. We have to reduce deficits, reduce spending and improve the competitiveness of economies in order to restore growth.”

Rajoy agreed, adding that coordinated action among Eurozone economies would also help.

“I was happy with Thursday’s bond auction, but not happy with Friday’s action,” he said. “However, spreads have not changed. The fact remains that we are cutting the deficit, implementing market and labour reforms, and reorganising the financial and public sectors.”

The leaders were also agreed on their desire for a financial transaction tax to be put in place in as many countries as possible.

Sarkozy has pushed for the tax to be implemented as quickly as possible, and perhaps only in France initially, while German Chancellor Angela Merkel has favoured further discussions to implement the tax across the whole Eurozone or EU.

Nonetheless, Rajoy believes there is no real difference of opinion.

“This is an area where, after long discussions, a decision can be made quickly –and the quicker the better,” he explained.

Sarkozy agreed, arguing: “I am convinced the tax would be better over the whole EU or even the whole world, but if we wait for every country in the world to begin to set tax, what happens? It will never start.

“I say financiers should have to pay tax, and a group of leading countries should adopt it to encourage everyone else to do it as well,” he continued.