ECONOMIC PRESSURE:THE EUROPEAN Commission pressed Italy and Greece to provide further details about their economic plans as the authorities in both countries moved to put the turmoil of the past fortnight behind them.
The Italian senate passed a new austerity plan yesterday and former European Central Bank vice-president Lucas Papademos was sworn in as Greek prime minister in charge of an emergency coalition.
European Council president Herman van Rompuy was holding talks in Rome last night with Prime Minister Silvio Berlusconi, who has pledged to resign once the plan clears the lower house of parliament this weekend.
The Brussels authorities have been careful to avoid comment on the merits of the plan to install former EU commissioner Mario Monti as head a new “technical government”. However, Mr van Rompuy said yesterday that Italy had no need for an election.
“A positive vote on the package: that’s what the markets expect, that’s what the rest of Europe expects. There’s more . . . to be done: the country needs reforms, not elections,” he said in the Tuscan town of Fiesole.
He also insisted the debt crisis will lead not weak countries to leave the single currency: “We will not ‘prune’ the euro zone to a more selective club.”
With markets tense about the fragile situation in Italy and Greece, the commission pushed for information from both countries. Although the EU’s executive branch sought answers from Rome by yesterday to 39 detailed questions on the austerity plan, the deadline has been extended. The questionnaire suggests new austerity policies may be required in 2012 and 2013 to achieve the target of a balanced budget by 2013.
Further doubt was cast on the plan when economists at Citigroup said Italy would require external aid. “On their own, the expected structural reforms and austerity measures are unlikely to restore market confidence.”
The first task for Mr Papademos’s administration is to secure an €8 billion bailout loan which was blocked by EU leaders and the International Monetary Fund when his predecessor, George Papandreou, called a referendum on the bailout. Greece needs the money to avert bankruptcy.
Separately, Germany’s constitutional court threw a spanner in the government’s political timetable by scheduling an oral hearing over a new parliamentary committee to expedite Bundestag approval for future bailout contributions. The Karlsruhe-based court has ruled all bailout fund contributions from Berlin require parliamentary approval, prompting fears this could hobble the fund’s ability to act. Berlin established a nine-member panel, reflecting the strength of Germany’s five-party lower chamber, as a compromise.
The decision to convene an oral hearing suggests the judges share some of the concerns of the two MPs who took the action.