Italy’s Monti takes center-stage at key euro finance meet

Italy’s new Prime Minister Mario Monti will take center-stage on Tuesday when euro finance ministers gather here for their last scheduled meeting of the year with partners concerned over IMF rescue planning.

The former EU commissioner gave himself the finance ministerial portfolio in the new unity government that took over from the coalition led by Silvio Berlusconi.

Monti is expected to unveil plans for accelerated reform at the meeting.

“The meeting is notionally about Greece, progress on leveraging up the size of the euro rescue fund and plans to ensure the medium-term liquidity of Europe’s banks,” said a European Union official, a veteran of such gatherings.

“But it will mostly revolve around Monti,” he added.

Detailed budget measures, which require final parliamentary approval, are due by a December 9 EU summit.

But Olli Rehn, European commissioner for economic and monetary affairs, suggested a more “ambitious timetable” was needed during a visit to Rome on Friday. Rehn will also attend the Brussels gathering.

Respected Italian daily La Stampa reported Sunday that International Monetary Fund officials were preparing loans to the value of 600 billion euros ($800 billion) as a contingency.

That would give the Italian government up to 18 months’ breathing space − as it has to refinance a staggering 400 billion euros in debt next year.

La Stampa’s report said the IMF would guarantee rates of as low as 4.0 percent − significantly better than the punishing commercial rates Italy is having to take, which run as high as 7.0 percent.

Italy is the world’s third-biggest sovereign borrower after the United States and Japan. La Stampa’s report suggested that this massive funding need meant the European Central Bank could become involved, using IMF guarantees.

Contacted by AFP, the IMF declined to comment, but French President Nicolas Sarkozy’s office made it clear that any problem with Italy would hit “the heart of the eurozone.”

The EU and the ECB have sent auditors to check Italy’s public accounts and the IMF will soon send its own experts, under a special surveillance mechanism agreed at a G20 summit in France earlier this month.

Prior to being forced from office, Berlusconi turned down an offer of financial aid from the IMF.

“We believed it was not adequate,” he said in an interview Sunday.

Italy’s nearly 2.0-trillion-euro public debt heading into certain 2012 recession means anything more than a private discussion about such a rescue is not on the agenda in these talks.

So Tuesday’s meeting, starting at 1600 GMT, will begin with a decision − repeatedly delayed since August − on releasing an 8.0-billion-euro tranche of loans to Athens.

This month Greece, like Italy, came under the control over a EU-friendly ‘technocratic’ government.

EU sources have said the release of the money has finally been approved, after Greek party leaders gave written undertakings that plans for cuts, tax rises and other reforms in Athens would survive elections set for the New Year.

More elusive however has been progress on ramping up the 440-billion-euro European Financial Stability Facility (EFSF).

Klaus Regling, the head of the EFSF, talked down initial hopes of a five-fold increase in its reach.

The official line is still that they are looking for leveraging in the region of “three-to-four times” a maximum 275-billion slice of government guarantees not already committed to Greek, Irish and Portuguese bailouts, officials said.

Pressure on the ECB to act as a US-style lender of last resort has intensified with even fellow Triple A-rated Austria and Finland abandoning the German stance of resistance.

But there is recognition at the highest levels that ECB policy changes should be seen to be free from political interference. That means the ministers are unlikely to say too much publicly on that either.

For months now, France has led international efforts to persuade Germany to let the ECB to buy bonds from euro states directly, not just on sell-on markets.

Supporters of this approach argue that only an institution that can print money − even devalue a currency to trade an economy’s way out of debt − will be able bring jittery investors into line.