Italian Prime Minister Silvio Berlusconi was put on the defensive at a crisis summit over the country’s finances and appointments at theEuropean Central Bank.
Before the leaders convened yesterday in Brussels, Berlusconi held face-to-face talks yesterday with European Union President Herman Van Rompuy and European Commission President Jose Barroso and then with German Chancellor Angela Merkel and French PresidentNicolas Sarkozy.
“I never flunked” an exam in my life, Berlusconi told reporters when asked if he was concerned over the push to cut Italy’s debt load, the biggest in the world after the U.S. and Japan.
The demand for discipline underscored European leaders’ concern of the vulnerability of Italy, whose debt totals more than $2 trillion, accounting for almost 120 percent of its gross domestic product. The ECB started buying Italian bonds two months ago to contain borrowing costs as yields surged.
The jousting over Italy’s economy, which Berlusconi called solid, came as the billionaire sought to placate Sarkozy over the refusal of Lorenzo Bini Smaghi to quit his post on the Executive Board of the Frankfurt-based central bank.
Sarkozy backed Italy’s Mario Draghi to replace France’s Jean-Claude Trichet as head of the ECB with the understanding that the Florence-born Bini Smaghi would quit and make way for a French candidate for the board. Berlusconi passed over Bini Smaghi last week as Draghi’s replacement at the Bank of Italy.
No ‘Casus Belli’
“I’m sure that Bini Smaghi will realize that he cannot be the casus belli of a relationship that is worsening between us and France and that he will quit by the end of the year, as it was agreed,” Berlusconi told reporters.
“What should I do, should I kill him?” the 75-year-old Berlusconi said he told Sarkozy.
Berlusconi, who was caught on a wiretap last month insulting Merkel, said he had a “long” conversation with the German leader about government finances at a meeting of European conservative leaders on the eve of the summit. Asked whether she was convinced by budget cuts Italy has taken, Berlusconi said: “I think so.”
Merkel called the meeting yesterday a “conversation among friends” with the leader of “a great and important partner for the euro area.”
The Italian government passed a 54 billion-euro package of spending cuts and tax increases in August to convince the ECB to purchase Italian bonds after the nation’s borrowing costs surged to euro-era records. The plan aims to balance the budget by 2013.
‘Among Friends’
“Confidence won’t result merely from a firewall,” Merkel said. “Italy has great economic strength, but Italy does also have a very high level of debt and that has to be reduced in a credible way in the years ahead.”
Asked if he has confidence in the capacity of Italy to carry out economic reforms, Sarkozy said he had confidence in the country.
“Let’s trust the sense of responsibility of the Italian authorities as a whole,” Sarkozy said at a press conference. He declined to answer a follow-up question about whether he had confidence in Berlusconi, allowing Merkel to speak instead.
To contact the reporter on this story: Chiara Vasarri in Brussels at cvasarri@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
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