Merkel confident Renzi will deliver on reforms

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German Chancellor Angela Merkel at a press conference in Florence with Italy's Prime Minister Matteo Renzi. Photo: Alberto Pizzoli/AFP
14:54 CET+01:00
German Chancellor Angela Merkel on Friday backed Italy's Matteo Renzi to deliver on a pledge to "turbo-charge" his reforms after the European Central Bank's decision to pump billions into the moribund eurozone economy.

Despite fundamental differences over the wisdom of the ECB's unprecedented bond-buying programme, the two leaders were able to find common ground at a summit here by agreeing that the so-called quantitative easing would not, on its own, be enough to pull the eurozone out of the mire.

The differences were underlined by Renzi welcoming the ECB initiative as a key element in what he depicted as a broader reorientation of European Union economic policy towards measures to promote jobs and growth.

Merkel, in contrast, declined to comment on the ECB's initiative, which is the subject of deep misgivings in Germany over the inflationary impact of 'printing money'.

Prior to Thursday's announcement, Merkel had aired concerns that making it cheaper and easier for European governments to refinance their debt would ease the pressure on them to keep taking the difficult decisions required to address structural overspending.

She diplomatically declined to repeat that criticism on Friday, saying she did not want to compromise the ECB's independence by commenting on its monetary policy decisions.

But she did pointedly remind her host that it was entrepreneurs who carried the primary responsibility for generating jobs. "No central bank in the world can substitute for implementing the right policies," she said.

Renzi said quantitative easing would complement a recent relaxation of how the European Commission interprets budget deficit rules for euro members, Brussels' plans for a €300 billion investment programme and the ongoing fall in the euro's value against the dollar, which makes European exports more competitive on world markets.

"These four factors are very important for Italy," Renzi told a press conference held in the Galleria dell' Accademia with Michelangelo's sculptural masterpiece David providing the backdrop.

"But what has been done does not mean that we can let up on our reforms. I want to put a turbo into them."

Merkel said she was confident that Renzi could deliver on an "ambitious" programme that spans electoral and constitutional reform, a shake-up of the labour market, an overhaul of the judicial system, a crackdown on tax dodging and a blitz on red tape.

"I certainly do not have the impression that the ECB's decision will slow the reform process in Italy. I have no doubt that what is proposed by Matteo will be implemented."

'Symbols of compromise'

Merkel, 60, said that optimism was shared by German businesses operating in Italy and she also offered an intriguing insight to the dynamic of her relationship with the 40-year-old Italian premier by revealing that every time he sees her he presents her with a booklet detailing the progress of his reform programme.

Renzi may be happy to play the role of schoolboy but he also appeared to be delivering a subtle lecture to his teacher with his choice of his hometown as the venue for Friday's talks.

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Showcasing Florence's role as the centre of the Renaissance was both a way of treating his guest and a reminder of Italy's pivotal role in creating modern Europe and its right to help steer its direction.

"We may not always have the same opinions on economic questions but the symbols of compromise are important," Renzi said in comments which echoed a warning earlier this week that Germany needs to avoid pitting itself against everyone else in the European Union.

Friday's summit came two days before elections in Greece which many fear could plunge the eurozone into a fresh crisis by producing a new government in Athens determined to renegotiate the terms of the bailouts that have kept the country in the single currency bloc.

Both leaders insisted that the Greek people had to make their own decisions. Merkel described a possible popular mandate for a revision of the debt terms and Greece's existing commitments as "two sides of the same coin but added: "I'm sure we will find a solution."

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