What emerged from the meeting with Obama and the top EU leaders at the G20 meeting that just ended in Los Cabos in Mexico was “agreement on both sides of the Atlantic on the need for growth, financial stability and fiscal responsibility”, according to Minister Giulio Terzi, who explained the “deep US concern for the euro zone situation”, and the “co-responsibility deeply felt by Obama, given that the EU and the US together make up half of world GDP”.
The US economy, Terzi said, has suffered a slowdown over the past three months and it is also for this reason that President Obama is worried. But these worries “are shared by us, as is the desire to work together” on, for example, a “new financial architecture that comprises supervision of the banking system, measures for the recapitalization of deposits and growth measures”. Germany too, the minister added, is increasingly convinced that growth is the way to go. So much so that Minister Terzi and his counterpart Guido Westerwelle discussed a document on a vision of Europe that goes beyond governance and in which, on Italy’s suggestion, “growth is acknowledged as a priority”.
A safety net
Europe must work on creating a system whereby countries at risk of contagion may be helped to confront spreads and carry out reforms. After months of negotiations and leaks, it was the Los Cabos G20 to voice the realization that the euro zone economies under speculative attack need a safety net. Europeans, US Treasury Secretary Timothy Geithner said, are trying “to make sure in the very near term they’re putting in place a set of measures that can help make sure that they’re supporting the financial systems of Europe and they are helping make sure that countries that are undertaking these reforms — like Spain and Italy — can borrow at existing low interest rates”. And President Barack Obama’s message was even clearer: hurry.
Lowering the pressure of the spread
The scheme in the works is not on the order of the Greek bailout, but rather one that lowers the pressure of the spread, which has reached alarming levels, on Spain and Italy and to allow those two countries to pursue reforms. “Reflection is under way”, Premier Mario Monti explained, “on the idea of using bailout funds that have thus far been granted only as loans, to buy State bonds on the market and lower the spread”. Monti spoke of mechanisms that could help “countries that have sound financial laws, like Italy, to see their efforts “recognized in terms of less abnormal spread levels”. However, the Premier warned, “the notion of a bailout is not even being considered for Italy, and in the case of Spain only for the banks”.
Four-way summit in Rome
The question now passes to the quadrilateral summit to be held on Friday in Rome, where Monti will be meeting with the leaders of Germany, Spain and France. And then to the EU Council at the end of the month, from which the G20 expects at least a “road map” that resembles as much as possible the expected changes. If Spanish Premier Mariano Rajoy is “satisfied”, support for Monti from French President Francois Hollande is ensured: “Italy has launched an idea that deserves consideration. We will be discussing it in Rome”, said the French president, who urged consideration of a role for the ECB.