Monti: Solve debt crisis or Europe risks breaking up

Italy’s prime minister Mario Monti warned of a potential breakup of Europe without greater urgency in efforts to lower government borrowing costs, as a standoff over ECB help for Italy and Spain hardened.

Mr Monti, in an interview with Germany’s Der Spiegel magazine published on Sunday, said that disagreements within the 17-nation eurozone are detracting from the policy response to the debt crisis and undermining the future of the EU.

“The tensions that have accompanied the eurozone in the past years are already showing signs of a psychological dissolution of Europe,” Mr Monti told Der Spiegel.

While he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market, Mr Monti said the problems “have to be solved quickly now so that there’s no further uncertainty about the eurozone’s ability to overcome the crisis”.

Spain and Italy, whose surging borrowing costs have shunted them to the heart of the turmoil in the eurozone, are resisting pressure from ECB president Mario Draghi to formally request aid in return for strict conditions before the central bank will buy their bonds.

Mr Monti and Spanish prime minister Mariano Rajoy have both said they will await further details as the ECB works up its plan. The German government said for the first time yesterday that Chancellor Angela Merkel supports Mr Draghi’s proposals.

French president Francois Hollande is pushing Mr Monti and Mr Rajoy to request aid from Europe’s bailout fund to help ease markets, Italian newspaper la Corriere della Sera reported. Mr Monti may speak with Mr Draghi today, the newspaper said.