Italy and France Team Up against Germany

Spiegel
January 11, 2012

Germany has long insisted that austerity be the primary strategy used in confronting the ongoing euro-zone debt crisis. Italy has now joined France in demanding a more nuanced approach. Prime Minister Monti will present his ideas to Chancellor Merkel in Berlin on Wednesday.

Sometimes, it doesn't take long for the most perfect of plans to go awry. Mario Monti, professor of economics and a former European commissioner, was heavily supported by Berlin when Italy was searching for a successor to Silvio Berlusconi as prime minister. Monti was to introduce far-reaching austerity measures in the heavily indebted country -- measures seen as vital to prevent Italy from dragging the entire euro zone down with it.

Monti, initially, did what was expected of him. He immediately passed a savings package worth €30 billion ($38 billion). And Berlin figured that more was on the way.

Now, though, the Italian prime minister seems to have lost his enthusiasm for austerity. He has begun pursuing a different direction -- one diametrically opposed to that which German Chancellor Angela Merkel would like to see. And on Wednesday, the two are set to meet in Berlin to talk about their differences.

The list is not insignificant. Monti would like to see the euro bailout fund expanded by hundreds of billions of euros in order to dramatically increase its reach and effectiveness. In addition, he wants the euro zone to collectivize debt in the form of euro bonds as a way of making it cheaper for heavily indebted countries in the common currency union to refinance their debt. Furthermore, the European Central Bank should, he believes, play a larger role in propping up struggling euro-zone countries and stabilizing the euro. And, he wants to begin moving away from austerity in favor of promoting economic growth.

It is a list that coincides to a large degree with French President Nicolas Sarkozy's own wish list. But Berlin has so far proved immovable. After all, no matter what strategy is pursued in the ongoing fight to stabilize the European common currency, Germany, as the bloc's richest country, will have to pay the lion's share of the bill. And for Merkel, that is not a recipe for popularity in Germany; she would prefer to risk aggravation with her European Union partners.

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