Italian PM Monti sees light at end of tunnel -- despite poor economic data
Italian Prime Minister Mario Monti said yesterday that Europe was starting to see light at the end of the tunnel of the eurozone's sovereign debt crisis, belying a welter of deteriorating economic data.
As eurozone unemployment hit a euro-era high and Spanish data showed capital fleeing its banks and retail sales falling again, Mr Monti's optimism was at odds with sentiment in markets, which are losing hope of swift intervention by the European Central Bank to address the region's problems.
Mr Monti has campaigned for concerted action by the eurozone's rescue funds and the ECB to bring down ruinous borrowing costs that threaten to force Spain and Italy, the bloc's third and fourth largest economies, out of credit markets.
"It is a tunnel but . . . some light is appearing at the end of the tunnel," he told RAI public radio before flying to Paris to meet French President Francois Hollande.
Mr Monti said decisions taken at last month's EU summit were starting to bear fruit.
"We are now seeing the results both in the willingness of European institutions as well as from the governments of individual countries, including Germany," he said.
ECB President Mario Draghi said last week the central bank would do whatever it takes within its mandate to preserve the euro, raising investors' expectations of a resumption of a long-suspended government bond-buying programme.
However, there has been no public sign that Germany, the eurozone's biggest economy and main paymaster, sees the need for urgent action.
"Everybody is waiting for Thursday to see if Mr Draghi can deliver," said Lex van Dam, hedge fund manager at Hampstead Capital. "He'd better pull a big rabbit out of his hat."
But central bank sources cautioned against expecting dramatic action at the monthly meeting of the ECB's policy-setting Governing Council, saying bold moves could be at least five weeks away because other elements must first fall into place.
They said Spain would first have to formally request a eurozone assistance programme, which it has so far resisted doing, and eurozone governments would have to agree to use their rescue funds to buy bonds in tandem with the ECB.
Mr Monti, who will also visit Finland and Spain, said he was confident Spanish Prime Minister Mariano Rajoy would be able to tackle the country's problems.
The scale of Mr Rajoy's challenge was highlighted yesterday when figures showed that capital flight from Spain accelerated in May, the month when Madrid was forced to nationalise the fourth biggest lender, Bankia, and before eurozone countries agreed to help bail out Spanish banks.
Meanwhile, near-bankrupt Greece has reported that it is fast running out of cash as it awaits the next instalment of aid from international lenders.
Deputy Finance Minister Christos Staikouras said that in the absence of €3.2bn needed to repay an ECB bond on August 20, Athens would lack the money to pay everyday public expenses. (Reuters)