(Updates with Rehn comments on joint euro bonds in fifth paragraph.)
Oct. 27 (Bloomberg) -- The European Union will closely monitor Italian Prime Minister Silvio Berlusconi’s commitments made to the EU last night on overhauling Italy’s economy and reducing debt, EU Economic and Monetary Affairs Commissioner Olli Rehn said.
“Yesterday, Italy presented a strategy for rapid fiscal consolidation and growth-enhancing structural reforms, with clear measures and an ambitious timetable,” Rehn said today in the text of a speech in Berlin. “Delivery on these commitments will be monitored closely by the commission and the Council.”
Rehn also praised the measures being taken in Ireland and Portugal to cut the budget deficit and revive growth.
“Thanks to the determined fiscal consolidation, restructuring of the banking sector and structural reforms, the Irish economy is on the path of recovery and is also rewarded by the market,” Rehn said. “Similarly, Portugal is making good progress with its program to underpin fiscal sustainability and improved competitiveness.”
Rehn said the commission “will quite soon, in a couple of weeks,” present a “consultation paper” outlining alternatives for common issuance of bonds in the euro region.
“Any type” of common euro bonds “would have to be accompanied by a substantially reinforced fiscal surveillance and policy coordination as an essential counterpart, so as to avoid moral hazard and ensure sustainable public finances. This would necessarily have implications for fiscal sovereignty, which calls for a substantive debate in euro area member states to see if they would be ready to accept it,” Rehn said.
He said EU leaders last night committed to further reinforcement of economic governance. “They are ready to introduce debt brakes into national legislation and call for prior examination of draft national budgets by the commission and the Council for such countries that violate the rules,” he said.
In fighting the debt crisis across the region, the European Central Bank has taken appropriate non-standard measures and “has lived up to its stability culture,” Rehn said. “The ECB has delivered stable prices in the euro area, and when faced with the threat to financial stability, it decisively took unconventional measures that were necessary and measured.”
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