Monti says markets must recognize Italian reforms

Wed Jan 11, 2012 10:40am EST
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By Stephen Brown and Alexandra Hudson

BERLIN (Reuters) - German Chancellor Angela Merkel praised Italy's new government on Wednesday for the speed with which it has launched reforms, prompting Prime Minister Mario Monti to say it was important for markets also to recognize Italian economic policy progress soon.

Merkel said at a joint news conference with Monti in Berlin that his technocrat government had been quick to launch urgent budgetary measures and now structural reforms aimed at making the Italian economy more competitive in order to boost growth.

"This will strengthen Italy," said Merkel on Wednesday.

Monti, while thanking the Italian people and parliament for what he called their "mature" response to very painful reforms, said his country could only make further progress within a more helpful European environment, including cheaper borrowing.

"The European context must become more favorable, by permitting in good time a lowering of interest rates and greater integration of the EU," said Monti.

Italy still faces 10-year borrowing costs of around 7 percent, widely viewed as unsustainable for an economy saddled with a debt of around 120 percent of GDP. Rome must refinance tens of billions of debt in the first four months of the year.

"In the financial markets, high interest rates could have been justified when markets were diffident about Italian economic policy, but not anymore, especially after representatives of those same markets have said they appreciated the efforts made," Monti said.

It was up to Europe to "facilitate the transformation of good policies into lower interest rates," he said.   Continued...