Italy blames Germany, France for EU debt crisis

Italian PM Mario Monti says when the "father and mother" of the Eurozone ignore deficit targets, it sets a bad example for other member nations.
Italy's Prime Minister Mario Monti gives a lecture on European economic situation during a seminar in Tokyo, Wednesday, March 28, 2012. Monti said that the two-largest economies of the Eurozone set a poor fiscal example for other nations, causing the current debt crisis. (Junji Kurokawa/The Associated Press)

Italian Prime Minister Mario Monti has accused the two largest economies in the eurozone of being responsible for the region's debt crisis.

Monti told reporters in Tokyo that because Germany and France failed to follow fiscal rules set out by the economic bloc, it set a poor example for other nations.

"The story goes back to 2003 [and] the still almost infant life of the euro," Monti said.

"It was in fact Germany and France that were loose concerning the public deficits and debts."

Monti, who replaced former Prime Minister Silvio Berlusconi in November, said that both Germany and France failed failed to limit budget deficits to no more than three per cent of gross domestic product during various times since the adoption of the euro.

Mario added that despite eurozone legislation that allows for punishing countries with deficits outside the accepted range, neither country was admonished.

"Of course if the father and mother of the eurozone are violating the rules, you could not expect... [countries such as] Greece to be compliant," he said.

Monti, who has a background in economics, was a member of the European Commission when it recommended sanctions against countries that missed deficit targets. The recommendation was vetoed by the European Council, which is comprised of elected officials.

Monti's comments come as European officials debate whether to boost the size of the continent's bailout fund. On Tuesday, Organization for Economic Co-operation and Development head Angel Gurria called for a €1 trillion ($1.3 trillion) firewall to protect European economies, while on Monday, German Chancellor Angela Merkel suggested a bailout fund closer to €700 billion.

Eurozone finance ministers are set to meet on Friday and Saturday in Copenhagen to debate an increase in the size of the bailout fund.

The meeting comes amid concerns about the financial health of other eurozone member nations, particularly Spain. The country is currently running a budget deficit of 5.3 per cent of GDP.

The OECD says Italy, the third-largest economy in the eurozone, needs €750 billion to refinance its debts over the next three years, while Spain requires €370 billion. 

High debts have already forced Greece, Portugal and Ireland to accept international bailouts.