Nov. 24 (Bloomberg) -- Italian Prime Minister Mario Monti said the European Union needs a fiscal accord with automatic sanctions to restore the credibility that was lost when France and Germany broke EU deficit rules eight years ago.
“The lost credibility of the stability pact in the past was largely due to the fact” that “Germany and France in 2003 were not abiding by the pact,” Monti told a press conference in Strasbourg, France, today with German Chancellor Angela Merkel and French President Nicolas Sarkozy. “That was a big mistake and I think that everyone has acknowledged that.”
In November 2003, Germany and France won an extra year to reduce their budget deficits to the EU limit of 3 percent of gross domestic product, overriding objections from four nations including Spain that the extension undermined fiscal rules and hurt the euro. Monti said today Italy was also “complicit” in the decision because it chaired the EU finance ministers’ group that approved the extension.
The euro region must now take steps toward a fiscal union, Merkel told today’s press conference, which came after the three leaders discussed the euro-region crisis over lunch. Sarkozy said France and Germany will make a joint proposal in the coming days to modify European treaties to tighten economic management of the euro area.
“Once we have agreed on rules that make good economic sense, those rules have to be applied without exceptions to big and small, old and new member states, and their application must be made as automatic as possible,” said Monti.
The Italian premier, who took office last week, recalled that as EU competition commissioner in 2004, he had “fought” to force member states to respect EU fiscal rules after France and Germany violated the deficit limits.
“That eventually did happen,” he said.
--Editors: Dan Liefgreen, James Hertling
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