Monti Says No ECB Bond Buying Due To Lack of Conditionality
BLOOMBERG TV EXCLUSIVE: Mario Monti, Prime Minister of Italy, spoke with Bloomberg Television's Erik Schatzker in New York today about considering another term after elections. He discussed why the EU's new bailout fund hasn't been used yet, saying "because it is being finalized. And in particular I think there is still some refinement ongoing on the precise nature and modalities of the conditionality that would have to be associated to the European Central Bank intervening in the markets to buy the bonds of a specific country."
Monti also said that his biggest fear is that "the political leaders of Europe do not involve enough attention to coping with the increasing resentments of one country vis-a-vis another country of the increasing attitude of nationalism, the many backlashes against integration that are there."
Monti on why he clarified a potential second term in office earlier today:
"I don't think it's a change. I confirm that I will not run for elections. And that is for two reasons. One I want to stick to my position of being outside, I don't say above, but outside the parties. And secondly, people go to elections, become members of parliament. I am already a member of parliament being senator for life."
"And I am very confident that the elections will bring about a political majority large enough so as to be able with a political leader to govern the country. All I'm saying is that I will be a senator. Should there be any special circumstances where the political forces would believe that there might be a need for my service I would consider."
On whether the 'special circumstance' is a hung parliament in which he'd continue to serve or whether he'd consider filling another kind of role in government:
"No. I'm not reflecting on any of these. I simply want the political forces to know that I don't have any specific plan or any specific will to do anything in the political future of Italy. I simply want them to know that and I would say in international community and the markets to know that I will still be there should there be a need."
On why the EU's new bailout fund hasn't been used:
"Because it is being finalized. And in particular I think there is still some refinement ongoing on the precise nature and modalities of the conditionality that would have to be associated to the European Central Bank intervening in the markets to buy the bonds of a specific country."
"First of all Italy was one for among the countries that insisted on having this instrument come to integrate the weaponry of the governance of the Eurozone. It will have to stick to the European Council conclusions of last June, and namely to be a conditionality to which applies not to any country, but to those countries which are already complying with all the policy requirements to certify that and to establish checks so that the countries continue to behave in that positive way."
"If this conditionality is the one that will be finally delivered should the country be in a market situation suggesting it's to make use, there will be I think nothing dishonorable, but now we are continuing to do our best in our domestic economic policy to make it with our own will and strength."
On what's left to be negotiated for the program to begin:
"I believe whether there should be extra conditions relative to those already included in each country's specific recommendations by the EU. And my clear answer is that there shouldn't be because that could go beyond the decision of the European Council, then whether the IMF should be involved in addition to the European Commission and the European Central Bank in the monitoring team, which I believe is not necessary. And so the institutions in charge of this that is the euro group of finance ministers, the European Central Bank, the European Financial Stability fund will have to come to a conclusion. Then the European Council of the heads of governments will have to do anything that might remain to be done."
On the timetable for when these plans will be finalized:
"I believe that should be really kept to a minimum because there is no reason to delay something that was already rather well defined last June at the European Council."
On what it would mean for Italy if Spain asks for EU assistance first:
"Let me underline first of all that the measures being taken in Spain by Prime Minister Rajoy and his team are very bold, far reaching both in terms of budgetary consolidation and in terms of structural reforms. Secondly, it's entirely in their decision as you said. This is all unchartered territory and it's difficult to see. It's well possible that if one country goes and makes the test of the new instrument then if it proves to be workable then another country or other countries might not even need to go themselves because the market will perceive that there is a promptly usable under certain condition safety net available for everybody, provided one does the right policies at home."
On whether he believes Italy's borrowing costs will come down on their own if another country were to test the mechanism first:
"Well first of all they are coming down on their own because of the policies conducted at home. And I don't need to anticipate now what might happen in case another country makes use of the instrument."
On next year's budget and what assumptions need to be made about borrowing costs:
"My finance minister would be in a better position to give you a precise answer, but we are guided by principles of prudence also in that respect. And the target of the budget will be, I can confirm this, and we have put in place all the necessary policies to get there a zero deficit or the balanced budget in structural terms that is once adjusted for the cycle. And this will be one of the most ambitious results around in the European Union these days."
On whether it would help to stimulate growth and generate additional tax receipts if the euro were weaker:
"The weakness of the euro which by construction tends to be a rather strong currency of which I am rather happy altogether, any temporary weakness of the euro of course would imply a greater competitiveness for European companies into the also imply however a bit more of a push towards higher inflation domestically in Europe, which does not appear to be a big problem now...I think I'll stop there. One can imagine many different ramifications, but it's not worth speculating."
On his biggest fear:
"It is a non-economical fear that is that the political leaders of Europe, among them temporarily I found myself, but that the political leaders of Europe do not involve enough attention to coping with the increasing resentments of one country vis-a-vis another country of the increasing attitude of nationalism, the many backlashes against integration that are there. This is partly a paradox."
"This is partly the outcome of the tensions within the Eurozone and we must be very, very careful to avoid that the euro, which is the most advanced substantively and symbolically element of the European construction, might end up bringing with it as a byproduct some disunion, some disintegration through the psychologies and the politics of the different countries. I think it will be important yes to continue to work on the stabilization mechanisms and so on and so forth, but looking clearly and directly these issues which may require a great political attention."