Monti Expects Euro Debt Firewall Deal

Italian Prime Minister Mario Monti, signaling the worst may be over for the euro region’s most distressed bonds, said he expects leaders to strike a deal by the end of the month on expanding a debt-crisis firewall.

While German Chancellor Angela Merkel has expressed reluctance to discuss increasing the size of Europe’s bailout kitty at a European Union summit in Brussels beginning today, Monti said he’s “confident” a deal will come.

“Size matters,” said Monti in an interview yesterday at the prime minister’s 16th-century residence in central Rome. “If the approach to firewalls is constructive enough in Europe, I believe we will all be in a better position to face any further contagion effect or any resurgence of the crisis.”

Monti is heading to a meeting of euro-area finance chiefs before the leaders’ summit as 1 trillion euros ($1.3 trillion) of emergency cash from the European Central Bank helps push the yield on Italy’s 10-year bonds — and their risk premium to German securities — to the lowest in six months.

“I don’t think it is likely” that spreads will widen again, Monti, 68, said in the interview, sitting in an ante-room of the Chigi Palace adorned by two 17th-century globes, a chandelier and gold-colored wallpaper. “The unpredictability of spreads is not negligible. But we see now in the case of Italy a steady, although gradual decline in the last several weeks. I don’t see honestly any reasons why this course should change.”

Bloomberg

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