Analysis: Monti takes off gloves in euro zone fight

Wed Aug 8, 2012 10:09am EDT
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By Barry Moody

ROME (Reuters) - Italian Prime Minister Mario Monti has taken the gloves off in his fight to save Italy from disaster in the euro zone debt crisis, daring to stand up to European paymaster Germany in a way unthinkable a few months back.

His change of attitude is driven by increasing Italian exasperation with repeated delays in formulating an effective response to a crisis on bond markets that has put Spain and Italy in the front line against an existential threat to the euro and perhaps the whole European Union.

Monti is trying to pressure German Chancellor Angela Merkel into agreeing to a European shield against high borrowing costs that are crippling Madrid and Rome and that he believes threaten the very survival of the euro if they lose access to markets.

But his outspoken tactics have already provoked a backlash in Germany and risk proving counter-productive.

The offensive partly reflects domestic pressure as Monti's popularity has slumped from above 70 percent to around 35 percent due to public anger that there has been no reward for debt-cutting sacrifices that have worsened a deep recession.

A respected economics professor fluent in French and English, the non-partisan Monti was called in last November to succeed billionaire media magnate Silvio Berlusconi as Italy tottered on the brink of a Greek-style economic meltdown.

He quietly got down to work, rarely even raising his voice, as he imposed more than 20 billion euros in painful tax hikes and spending cuts within weeks, followed by a series of measures intended to stimulate a chronically stagnant economy.

Since June, Europeans have seen a new, tougher Monti resisting perceived German lecturing that has made Merkel highly unpopular across southern Europe.   Continued...

Italy's Prime Minister Mario Monti attends a news conference during his visit to Finland, at Finnish Prime Minister's official residence in Helsinki August 1, 2012. REUTERS/Mikko Stig/Lehtikuva