Acceding to pressure from European leaders, Italy “invited” the International Monetary Fund to look over its shoulder to ensure that Rome is carrying out reforms devised to keep the country from succumbing to Europe’s widening sovereign debt crisis, European Union officials said Friday.In an extraordinary move, Italy said it had offered to allow the fund to scrutinize its books every three months to make sure a $75 billion austerity package is carried out according to plan.
A team from the European Commission will also travel to Rome next week to start monitoring Rome’s efforts, the president of the group, José Manuel Barroso, said.
European officials said that its leaders have been urging this step upon Italy’s prime minister, Silvio Berlusconi, for some time. But final agreement on the idea was not reached until Thursday night, when President Obama suggested that President Nicolas Sarkozy of France call together leaders of the euro zone countries for an impromptu meeting on the debt crisis, a senior United States official said on Friday.
It was during that meeting, according to this official, that Mr. Berlusconi offered to submit Italy to I.M.F. scrutiny.
Italy, the Continent’s third-largest economy, is the problem Europe has been trying to avoid by solving the Greek crisis. Should Italy get swept up in the debt contagion, it would threaten to overwhelm even the latest bailout vehicle being assembled, the $1.4 trillion European Financial Stability Facility, taking Europe’s debt crisis to a new level and potentially weighing on the global economy.
Even that backstop seemed in doubt on Friday after the summit meeting of the Group of 20 nations broke up with little apparent progress on resolving Europe’s debt crisis, aside from the decision to have the I.M.F. monitor Italy. Germany’s chancellor, Angela Merkel, acknowledged that Europe’s leaders had so far failed to interest any of the Group of 20 nations in investing in the new facility — a major goal of European leaders.
Mrs. Merkel said cash-rich countries like China and Russia wanted more guarantees that they would not be throwing good money after bad before making any commitments. They are particularly eager to have the I.M.F. oversee any such fund to guard against losses on their investments.
A separate effort to bring more I.M.F. money to the table has also failed to get off the ground, at least for now, though officials are said to be looking to raise money through a sort of trust fund. Separately, the group has discussed setting up lines of credit to help small countries hurt by the crisis.
President Obama called on world leaders to continue to work to manage the global economic crisis, saluting them for making “important progress.”
Mr. Obama, who has spent the last two days shuttling between meetings trying to salvage last week’s European debt deal, said the agreement on increased scrutiny of Italy was a step in the right direction.
“There’s no excuse for inaction,” Mr. Obama said. “That’s true globally, and it’s certainly true back home right now.” Mr. Obama’s remarks came at a news conference at the Debussy Theater — usually the site of Cannes film festival movie premieres.
Fears that European leaders still have not nailed down the details of a grand plan intended to contain the euro crisis have caused Italy’s borrowing rates to rise in recent days to levels approaching those that forced Greece, Portugal and Ireland to ask for bailout packages from their European partners.
Yet, Mr. Berlusconi’s shaky coalition government is having trouble implementing a number of painful austerity measures passed recently to reduce the nation’s deficit and its $2.5 trillion mountain of debt.
Further complicating matters, his government is hanging by a thread, and faces challenges from his main coalition party, the Northern League, which has already said it did not agree with all the structural changes adopted by Rome to bring the nation’s finances under control.
Mr. Sarkozy and Mrs. Merkel have been pressuring Mr. Berlusconi to fulfill Italy’s financial commitments, but to date the Italian prime minister has been able to muster only a letter outlining his government’s intentions.
Publicly, European officials are presenting Italy’s decision to bring in the I.M.F. as purely voluntary. “We didn’t put Italy in a corner,” said Herman van Rompuy, the European Commission president. “They themselves decided to invite the I.M.F..”
Mr. Berlusconi tried to minimize the political impact of the decision to bring in the I.M.F., saying that it had been requested by Italy rather than imposed by world leaders. But few countries are eager to surrender their sovereignty to the fund, and Italy appears to be no exception.
Behind closed doors, said one European Union official, leaders encouraged Mr. Berlusconi to bring in the group’s auditors to demonstrate to world markets that Italy is making a credible effort to cut its deficits and make changes to restore growth, which is currently close to nonexistent.
It is an extraordinary step for the fund, which typically monitors only countries that are the recipients of bailouts. But the I.M.F. appears to be increasing its clout and presence in Europe as the crisis grows. Among other things, its managing director, the former French finance minister, Christine Lagarde, wants the group to oversee a part of the proposed European bailout fund, which is seeking to lure financial contributions from China, Russia and other cash-rich countries.
The I.M.F. is already overseeing the bailouts of three Western European countries — Ireland, Portugal and Greece — something that would have been all but unthinkable just a few years ago.
The announcement of the I.M.F.’s surveillance in Italy came after the Greek prime minister, George A. Papandreou, on Thurday called off a referendum on a bailout deal for Greece. Mr. Papandreou’s decision to hold a referendum had thrown financial markets into a tailspin and sowed panic among leaders of the Group of 20 who have been searching for ways to stem the contagion.
A team from the European Commission will also travel to Rome next week to start monitoring Rome’s efforts, the president of the group, José Manuel Barroso, said.
European officials said that its leaders have been urging this step upon Italy’s prime minister, Silvio Berlusconi, for some time. But final agreement on the idea was not reached until Thursday night, when President Obama suggested that President Nicolas Sarkozy of France call together leaders of the euro zone countries for an impromptu meeting on the debt crisis, a senior United States official said on Friday.
It was during that meeting, according to this official, that Mr. Berlusconi offered to submit Italy to I.M.F. scrutiny.
Italy, the Continent’s third-largest economy, is the problem Europe has been trying to avoid by solving the Greek crisis. Should Italy get swept up in the debt contagion, it would threaten to overwhelm even the latest bailout vehicle being assembled, the $1.4 trillion European Financial Stability Facility, taking Europe’s debt crisis to a new level and potentially weighing on the global economy.
Even that backstop seemed in doubt on Friday after the summit meeting of the Group of 20 nations broke up with little apparent progress on resolving Europe’s debt crisis, aside from the decision to have the I.M.F. monitor Italy. Germany’s chancellor, Angela Merkel, acknowledged that Europe’s leaders had so far failed to interest any of the Group of 20 nations in investing in the new facility — a major goal of European leaders.
Mrs. Merkel said cash-rich countries like China and Russia wanted more guarantees that they would not be throwing good money after bad before making any commitments. They are particularly eager to have the I.M.F. oversee any such fund to guard against losses on their investments.
A separate effort to bring more I.M.F. money to the table has also failed to get off the ground, at least for now, though officials are said to be looking to raise money through a sort of trust fund. Separately, the group has discussed setting up lines of credit to help small countries hurt by the crisis.
President Obama called on world leaders to continue to work to manage the global economic crisis, saluting them for making “important progress.”
Mr. Obama, who has spent the last two days shuttling between meetings trying to salvage last week’s European debt deal, said the agreement on increased scrutiny of Italy was a step in the right direction.
“There’s no excuse for inaction,” Mr. Obama said. “That’s true globally, and it’s certainly true back home right now.” Mr. Obama’s remarks came at a news conference at the Debussy Theater — usually the site of Cannes film festival movie premieres.
Fears that European leaders still have not nailed down the details of a grand plan intended to contain the euro crisis have caused Italy’s borrowing rates to rise in recent days to levels approaching those that forced Greece, Portugal and Ireland to ask for bailout packages from their European partners.
Yet, Mr. Berlusconi’s shaky coalition government is having trouble implementing a number of painful austerity measures passed recently to reduce the nation’s deficit and its $2.5 trillion mountain of debt.
Further complicating matters, his government is hanging by a thread, and faces challenges from his main coalition party, the Northern League, which has already said it did not agree with all the structural changes adopted by Rome to bring the nation’s finances under control.
Mr. Sarkozy and Mrs. Merkel have been pressuring Mr. Berlusconi to fulfill Italy’s financial commitments, but to date the Italian prime minister has been able to muster only a letter outlining his government’s intentions.
Publicly, European officials are presenting Italy’s decision to bring in the I.M.F. as purely voluntary. “We didn’t put Italy in a corner,” said Herman van Rompuy, the European Commission president. “They themselves decided to invite the I.M.F..”
Mr. Berlusconi tried to minimize the political impact of the decision to bring in the I.M.F., saying that it had been requested by Italy rather than imposed by world leaders. But few countries are eager to surrender their sovereignty to the fund, and Italy appears to be no exception.
Behind closed doors, said one European Union official, leaders encouraged Mr. Berlusconi to bring in the group’s auditors to demonstrate to world markets that Italy is making a credible effort to cut its deficits and make changes to restore growth, which is currently close to nonexistent.
It is an extraordinary step for the fund, which typically monitors only countries that are the recipients of bailouts. But the I.M.F. appears to be increasing its clout and presence in Europe as the crisis grows. Among other things, its managing director, the former French finance minister, Christine Lagarde, wants the group to oversee a part of the proposed European bailout fund, which is seeking to lure financial contributions from China, Russia and other cash-rich countries.
The I.M.F. is already overseeing the bailouts of three Western European countries — Ireland, Portugal and Greece — something that would have been all but unthinkable just a few years ago.
The announcement of the I.M.F.’s surveillance in Italy came after the Greek prime minister, George A. Papandreou, on Thurday called off a referendum on a bailout deal for Greece. Mr. Papandreou’s decision to hold a referendum had thrown financial markets into a tailspin and sowed panic among leaders of the Group of 20 who have been searching for ways to stem the contagion.
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