They had come to discuss Greece, but as the EU’s finance chiefs met in Brussels, it was fears of an Italian default that was focusing minds. Confidence in Italy’s ability to service its huge debt nosed dived last week. Since then it has come under market attack. In Berlin, Chancellor Angela Merkel said it was Rome’s responsibility to restore stability.
‘‘Italy must itself send an important signal by agreeing on a budget that meets the need for frugality and consolidation. I have full confidence that the Italian government will pass exactly this kind of budget,” the German leader said.
Officials in Brussels described it as a coordination and not a crisis meeting, but a new sense of urgency appears to have taken hold. Experts admit such a scenario would be a defining moment for the eurozone.
“In case of an Italian default, the eurozone would be confronted by the following question: either it develops totally new forms of help or it
breaks apart. Obviously, a collapse of the eurozone would be a catastrophe for Europe – for Germany as well as for Italy – but it would also be a major shock for the global economy,” Daniel Gros, Director of the Centre for European Policy Studies.
It is believed the euro zone’s existing rescue mechanism would also be insufficient to save Italy. Our Brussels correspondent Olaf Bruns says: ‘‘The worse case scenario is already well known. For the moment, however, Europe’s financial leaders say this is the realm of ‘‘pure speculation’‘. Rumours that the EU’s financial safety net will have to been widened have also been denied. For the moment at least.’‘