March 20, 2023

Italy and Spain Keep E.C.B.’s Offer on the Shelf

Instead, both the Spanish prime minister, Mariano Rajoy, and his Italian counterpart, Mario Monti, insisted that they would continue to push for rapid adoption of a European fiscal and banking union. “With regard to the European agenda, Spain and Italy are more united than ever,” Mr. Rajoy said at a joint press conference with Mr. Monti.

Mr. Rajoy has been under pressure to tap a bond-buying program announced by Mario Draghi, the president of the E.C.B., in early September. But he has refused to leap at the opportunity, and on Monday he said Madrid would ask for such funding only when he felt it was “convenient” to do so. Mr. Monti also dismissed the idea that Italy would need such help to meet its immediate refinancing obligations.

Neither leader is eager to expose his government’s finances to the greater European scrutiny that requesting the aid would entail.

The Madrid meeting came shortly after Mr. Draghi endorsed a proposal initially made by Wolfgang Schäuble, the German finance minister, to establish a European monetary and economic affairs commissioner. That person would have the power to intervene in national budgets if euro zone governments broke deficit rules. Creating such a post would probably would require the approval of all 27 countries in the European Union.

“If we want to restore confidence in the euro zone, countries will have to transfer part of their sovereignty to the European level,” Mr. Draghi said last week during an interview with the German magazine Der Spiegel.

Mr. Rajoy and Mr. Monti discussed the supercommissioner proposal on Monday, but neither offered support for the idea, warning that it could further confuse investors about policy making in the euro zone.

“There is a limit to the signals that can be given to the markets in terms of fiscal virtue,” said Mr. Monti. “The markets could see this as meaning that the existing instruments don’t work.”

The Rajoy-Monti show of unity underlines the extent to which Madrid and Rome face the same challenges in persuading investors to buy their debt at a sustainable borrowing cost.

Mr. Monti argued that the difference between the interest rates of German and Italian government bonds, albeit less than before the E.C.B.’s bond-buying offer, remained “higher than what is justified” by economic fundamentals.

Mr. Rajoy went a step further. “We cannot live in a European Union where some countries get financing for free and others for a lot more,” he said.

But for now, Mr. Rajoy also has his own struggles, including a Spanish jobless rate of 25 percent and a separatist drive in Catalonia, Spain’s most powerful economic region. Asked about the political tensions with Catalonia, Mr. Rajoy insisted on Monday that “we will overcome this situation through dialogue and by applying the law.”

But Mr. Rajoy also accused Artur Mas, the Catalan leader, of having left him no room to negotiate after Mr. Mas visited him in September to demand that Catalonia receive a better tax treatment from Madrid. “You cannot say take it or leave it,” Mr. Rajoy said.

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