Dutch Prime Minister Mark Rutte has said that Italy should take responsibility for managing the cost of its sovereign debt in the financial markets, according to Bloomberg.
“In dividing the work of the monetary system and reducing the spread, the country must ensure that the fundamentals are right,” Rutte said in an interview in Brussels after the European Union summit.
The country’s bond yields have risen in recent weeks with indications that the European Central Bank is preparing to raise interest rates to fight inflation.
The price of Italian 10-year government bonds has plummeted in recent weeks, pushing the yield slightly above 4%, the highest since 2014. Rutte said he believes the situation “is still manageable for now”.
Italy’s plight has prompted the ECB to say it is considering a new tool to stave off bond market turmoil as it draws up plans to tighten monetary policy.
Rutte said it was up to the ECB to decide whether more should be done for Italy, but that he had confidence in the “enormous credibility” of Italian Prime Minister Mario Draghi to manage the situation.
“Draghi is implementing the reform plan based on the resilience program, which in itself will help improve the fundamentals of the Italian economy,” Rutte said.
The Dutch government is reaching out to the northern EU countries, expressing skepticism about financial aid to countries in debt.
Two years ago, Rutte pushed for “money-making reforms” at an EU summit and walked out with his coveted reforms tied to $ 800 billion ($ 844 billion) in capital and the recently invented mechanism. “which could stop any payments to governments that do not meet their reform commitments.
Rutte said he was willing to activate this “handbrake” mechanism if needed.
“It is there to be used if needed,” he said. “It’s more than just a scarecrow.”
Rutte said his view of the EU had evolved over the years from a rather “narrow view” to a view that it was more than just a large internal market – a “geopolitical house of power” that cared about collective security of the Union.
“I used to see the EU from my party’s traditional stance, which was very focused on currency, on the internal market, on making a lot of money together,” Rutte said.
He also expressed confidence in the steps taken by Italy under Draghi.
“I’m really fascinated and positive about the fact that you are now witnessing reforms in Italy and other countries that I was afraid I would never see in my life,” Rutte said. “We like the idea that you are giving something in return for the reforms.”
The architect of these reforms in Italy has his support. “The best thing that has happened in Italy in the last five years has been Mario Draghi.”
Source: Capital
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