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Italian Leader Presses His Case for Budget Relief in Europe Italian Leader Presses His Case for Budget Relief in Europe
(about 1 hour later)
BRUSSELS — The presidency of the European Union is largely ceremonial, rotating every six months among the bloc’s 28 nations. But Prime Minister Matteo Renzi of Italy means to use its new presidency as a platform from which to seek relief for his country’s debt-saddled economy.BRUSSELS — The presidency of the European Union is largely ceremonial, rotating every six months among the bloc’s 28 nations. But Prime Minister Matteo Renzi of Italy means to use its new presidency as a platform from which to seek relief for his country’s debt-saddled economy.
On Wednesday, the second day of his nation’s six-month turn, Mr. Renzi, 39, said that the bloc’s fiscal rules should put less emphasis on debt and deficit targets and do more to stimulate members’ economies.On Wednesday, the second day of his nation’s six-month turn, Mr. Renzi, 39, said that the bloc’s fiscal rules should put less emphasis on debt and deficit targets and do more to stimulate members’ economies.
“What we’re asking for now is to have growth as a fundamental element of European policy,” Mr. Renzi said at the European Parliament, meeting in Strasbourg, France.“What we’re asking for now is to have growth as a fundamental element of European policy,” Mr. Renzi said at the European Parliament, meeting in Strasbourg, France.
During his appearance, the charismatic and reform-minded prime minister, whose center-left Democratic Party won a resounding victory in European elections in May, was mobbed by photographers, and he received a standing ovation at the end of his speech.During his appearance, the charismatic and reform-minded prime minister, whose center-left Democratic Party won a resounding victory in European elections in May, was mobbed by photographers, and he received a standing ovation at the end of his speech.
Italy stirred some of the deepest fears at the low point of the European financial crisis as the cost of its national debt risked spiraling out of control. Unlike countries like Greece and Ireland, which received bailouts, Italy was considered too big to rescue.Italy stirred some of the deepest fears at the low point of the European financial crisis as the cost of its national debt risked spiraling out of control. Unlike countries like Greece and Ireland, which received bailouts, Italy was considered too big to rescue.
Three years later, Italy can borrow again at manageable rates of interest, and Mr. Renzi, who became prime minister in February on promises of revamping the economy, continues to inspire confidence among voters.Three years later, Italy can borrow again at manageable rates of interest, and Mr. Renzi, who became prime minister in February on promises of revamping the economy, continues to inspire confidence among voters.
Yet Italy’s economic prospects have arguably grown worse, and the main concern is a wearily familiar one: The country’s towering public debt stands at about 130 percent of gross domestic product, the third largest such ratio in the developed world, after those of Japan and Greece.Yet Italy’s economic prospects have arguably grown worse, and the main concern is a wearily familiar one: The country’s towering public debt stands at about 130 percent of gross domestic product, the third largest such ratio in the developed world, after those of Japan and Greece.
Italy’s problems eased mainly because of a promise by Mario Draghi, the president of the European Central Bank, to use its financial clout to protect countries like Italy and Spain from financial collapse. But so far, the central bank’s main weapon of intervention in the debt markets — a proposed program of government bond-buying known as Outright Monetary Transactions — has not been put to an actual market test.Italy’s problems eased mainly because of a promise by Mario Draghi, the president of the European Central Bank, to use its financial clout to protect countries like Italy and Spain from financial collapse. But so far, the central bank’s main weapon of intervention in the debt markets — a proposed program of government bond-buying known as Outright Monetary Transactions — has not been put to an actual market test.
For Italy, there is “a very real danger that debt rises inexorably higher, forcing the country into some form of default,” said James Howat, an economist with Capital Economics.For Italy, there is “a very real danger that debt rises inexorably higher, forcing the country into some form of default,” said James Howat, an economist with Capital Economics.
As that debt mounts in Italy — Mr. Howat said it was likely to reach 135 percent of G.D.P. this year — the stability of the euro currency union, which is only just emerging from six years of nearly constant turmoil, could once against come into question. As that debt mounts in Italy — Mr. Howat said it was likely to reach 135 percent of G.D.P. this year — the stability of the euro currency union, which is only just emerging from six years of nearly constant turmoil, could once again come into question.
Because Mr. Renzi faces such severe fiscal limitations at home, he has sought external relief. He has already provoked a furious debate by proposing to ease some of the strictures of Europe’s fiscal rule book, known as the Stability and Growth Pact.Because Mr. Renzi faces such severe fiscal limitations at home, he has sought external relief. He has already provoked a furious debate by proposing to ease some of the strictures of Europe’s fiscal rule book, known as the Stability and Growth Pact.
Last month Mr. Renzi publicly referred to the European Commission, the policy-making body that enforces the rule book, as a “nagging old aunt.” On Wednesday, referring to the Stability and Growth Pact, Mr. Renzi called for a new emphasis on stimulating growth.Last month Mr. Renzi publicly referred to the European Commission, the policy-making body that enforces the rule book, as a “nagging old aunt.” On Wednesday, referring to the Stability and Growth Pact, Mr. Renzi called for a new emphasis on stimulating growth.
He gave no details of what he was seeking, but his remarks drew immediate fire from Manfred Weber, a German member of the European Parliament. “With a debt of 130 percent of G.D.P., where is the money supposed to come from?” Mr. Weber asked Mr. Renzi, referring to Italy.He gave no details of what he was seeking, but his remarks drew immediate fire from Manfred Weber, a German member of the European Parliament. “With a debt of 130 percent of G.D.P., where is the money supposed to come from?” Mr. Weber asked Mr. Renzi, referring to Italy.
Mr. Renzi has put himself on a collision course with Germany, a stickler for the bloc’s fiscal rules.Mr. Renzi has put himself on a collision course with Germany, a stickler for the bloc’s fiscal rules.
“Rome and Berlin are not on the same page when it comes to fiscal policy in the euro zone and have been at daggers drawn for quite some time,” said Nicholas Spiro of Spiro Sovereign Strategy, a consulting firm.“Rome and Berlin are not on the same page when it comes to fiscal policy in the euro zone and have been at daggers drawn for quite some time,” said Nicholas Spiro of Spiro Sovereign Strategy, a consulting firm.
Chancellor Angela Merkel of Germany “will face him down,” Mr. Spiro predicted, referring to Mr. Renzi, but under pressure to further ease austerity, “will throw him a few bones.”Chancellor Angela Merkel of Germany “will face him down,” Mr. Spiro predicted, referring to Mr. Renzi, but under pressure to further ease austerity, “will throw him a few bones.”
One possibility, some economists say, might be to let Italy have more leeway in public spending that would not be counted against national budget limits.One possibility, some economists say, might be to let Italy have more leeway in public spending that would not be counted against national budget limits.
Despite the mainly ceremonial role, the European Union presidency does endow members of the Italian government with the authority to run European Union ministerial meetings. The first of those gatherings begins on Thursday when top officials of the bloc arrive in Rome for festivities to observe the start of Italy’s turn at the helm.Despite the mainly ceremonial role, the European Union presidency does endow members of the Italian government with the authority to run European Union ministerial meetings. The first of those gatherings begins on Thursday when top officials of the bloc arrive in Rome for festivities to observe the start of Italy’s turn at the helm.
In another sign of expanding Italian influence, Roberto Gualtieri, a lawmaker from Mr. Renzi’s party, is expected to be formally confirmed in coming days in the top post on the European Parliament’s influential economic affairs committee.In another sign of expanding Italian influence, Roberto Gualtieri, a lawmaker from Mr. Renzi’s party, is expected to be formally confirmed in coming days in the top post on the European Parliament’s influential economic affairs committee.
But perhaps the most significant advance for Mr. Renzi’s European goals was the nomination last week of Jean-Claude Juncker to lead the European Commission, the bloc’s top policy-making arm. Backed by the French president, François Hollande, Mr. Renzi made the introduction of greater budgetary flexibility a condition for supporting Mr. Juncker.But perhaps the most significant advance for Mr. Renzi’s European goals was the nomination last week of Jean-Claude Juncker to lead the European Commission, the bloc’s top policy-making arm. Backed by the French president, François Hollande, Mr. Renzi made the introduction of greater budgetary flexibility a condition for supporting Mr. Juncker.