Italian Economy Minister Giulio Tremonti stepped up calls for a more co-ordinated response to the eurozone debt crisis on Saturday ahead of a potentially vital summit between the leaders of France and Germany next week.
--- Almost 1 in 3 Germans expect euro to collapse by 2021
Tremonti returned to proposals - rejected in the past by Berlin and Paris - for the creation of common eurozone bonds that would effectively make individual governments debt a common burden.
His British counterpart George Osborne, long a supporter from outside the eurozone of more fiscal integration within the currency bloc, went as far as to say that some form of outright fiscal union was now needed. "A lot depends on the choices which may be made about Europe and for Europe in the coming days," Tremonti told a news conference at which he detailed some of the steps contained in a 45.5 billion euro austerity package unveiled late on Friday.
Rome has been at the centre of the eurozone crisis over the past month, with the European Central Bank forced to buy Italian bonds to stem market panic and prevent borrowing costs in the eurozone's third largest economy spinning out of control. The austerity package unveiled on Friday, which contained a painful mix of spending cuts and tax increases, was demanded by the ECB in exchange for a commitment to protect Italian bonds but Tremonti said the problem risked spreading unless Europe ended its piecemeal approach to the crisis. "A greater degree of integration and consolidation of public finances in Europe is necessary," he said, as he made a fresh appeal for commonly issued eurozone bonds to calm fears about the credit-worthiness of the bloc as a whole.
"We would not have arrived where we are if we had had the euro bond," he said.
Tremonti's remarks come amid growing calls for a more decisive response to the crisis from eurozone leaders. German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Paris for talks on the crisis next Tuesday. Tremonti said there were "strong expectations" of the meeting and added that signs were pointing to a more co-ordinated policy approach.
"We expect developments which we think could and should take us in a direction towards fiscal consolidation and integration in Europe, otherwise the complications will continue," he said. Osborne said deeper integration had been the inevitable conclusion from the start of the single currency project. Asked if the only answer for the eurozone was some kind of fiscal union, he told BBC radio: "The short answer is yes."
A new poll for the Bild am Sonntag newspaper on Saturday showed 31 percent of Germans believe the euro will be gone by 2021. Italy has the second highest public debt burden in the eurozone at 120 percent of gross domestic product but had until recently stayed out of the crisis thanks to a relatively modest budget deficit and a generally conservative financial system.
However doubts about its chronically slack growth and its divided centre-right government led to a sharp turnaround in market sentiment last month. Although markets have not had time to react to the latest austerity package, the surge in bond yields which had driven Italy's borrowing costs to unsustainable levels has eased since the ECB began buying Italian bonds on Monday.
Both Germany, effectively the eurozone's paymaster, and France have opposed the idea of jointly issued bonds which would allow weaker and more indebted states to piggy back on more highly rated countries and issue debt more cheaply.
They say common debt issuance would remove a key driver of fiscal discipline in individual member states and push up their own borrowing costs as AAA-rated sovereigns.
But as the crisis has spread from smaller countries like Greece and Ireland to big economies like Italy, the prospect of an emergency that would overwhelm all existing bailout tools has also raised concerns about the impact in the rest of the world.