Italy's Monti reopens old wound

The eurozone's two biggest economies had not "abided" by the currency area's deficit rules, thus setting a "bad example" for the rest of the continent, the Italian Prime Minister said Wednesday.

"The story goes back to 2003 and the still almost infant life of the euro," Monti told reporters in Tokyo, where he is currently holding political talks with Japanese leaders.

Describing the deficit and debt policies of the two countries as "loose" at the time, he accused them of flouting the eurozone's three percent annual budget deficit rule, and making efforts to get away with it.

"Despite recommendations, a meeting of ministers from European Union governments decided not to punish France and Germany for going beyond the deficit limit.

Coming home to roost

Mario Monti – a respected technocrat who replaced Silvio Berlusconi as Italian Prime Minister in November – was a member of the European Commission in 2003, which recommended sanctions against countries breaking EU budget rules.

At the time, Germany and France were unable to control spiraling public deficits, citing economic emergency situations due to years of stagnating growth as excuses for over-the-top deficits.

The European Council – made up of the leaders of EU member states – vetoed the Commission's move to punish the offenders.

Noting the deal had been made "with the complicity" of Italy, he added however that "of course, if the father and mother of the eurozone are violating the rules, you  cannot expect countries such as Greece to be compliant."

The 17-nation eurozone is struggling to avoid collapse in the face of a debt crisis that has driven Greece to the brink of bankruptcy and has engulfed Portugal, Ireland and Spain. Italy is close to being dragged into the mire, needing at least 750 billion euros to finance its debt this year.

Expressing the hope that fears of contagion will soon be a "thing of the past," Monti said he saw "more fiscal discipline" among member states, as "firewalls" against the debt crisis were currently being "fortified."

uhe/gb (AFP, Reuters)