German Finance Minister hails Monti reforms

PanARMENIAN.Net - Italy must implement the reforms set out by Prime Minister Mario Monti to avoid becoming the next victim of euro zone contagion after the bailout for Spain's banks, German Finance Minister Wolfgang Schaeuble told an Italian daily, according to Reuters.

Other euro zone countries including Spain and France must also stick to the reform path, he said, while Greece would have to do so whether it stays in the euro or not.

"If Italy continues along Monti's path there will be no risks," the German minister was quoted as saying in an interview with La Stampa on Wednesday, June 13. "Spain too is on the right path. It does not need an aid program. It has a specific problem with its banking sector and I am sure it will solve it."

Monti's austerity drive and a radical pension reform have been welcomed by investors but support has been waning after Rome failed to balance tax hikes with bold pro-growth reforms.

If the economy does not start to grow after a decade of stagnation, Italy will face mounting difficulties in cutting its debt, now at 120 percent of gross domestic product and second only to Greece's mountainous liabilities in the euro zone.

Schaeuble said he did not agree with an Italian suggestion that certain public investments be excluded when calculating a country's deficit.

"I would not advise to solve certain problems by changing certain statistics. It did not work well for some countries when they joined the European Monetary Union. We will not repeat the same mistake," he said.

Schaeuble said he did not agree it was inevitable that Greece would leave the euro after a general election on June 17 that was called after an inconclusive poll last month left the country unable to form a government.

"Greece must carry out significant structural adjustments to sort out its lack of competitiveness and its weak public finances. There is no other way," said the minister. "If Greece were to leave the euro, this would not change its need to carry out reforms." Schaeuble criticized the new French government's decision to roll back the pension age for people who have worked since early in life, partially reversing a reform that had been welcomed by financial markets.

"In Europe we have decided to adapt our welfare systems to the demographic evolution. Our countries are all ageing," he said. "But President (Francois) Hollande's decision to lower the retirement age does not correspond to that decision."