FRANKFURT (Reuters) - The market rout that hit Italy last week shows that the euro zone is not yet “crisis proof” and more reforms are needed at both the national and European levels, the head of Germany’s central bank said on Tuesday.
Investors are nervous about Italy’s new anti-establishment government, which has promised to increase spending, cut taxes and challenge European treaties, raising questions about the country’s long-term future in the euro.
“The currency union is not yet crisis proof in a durable way,” Jens Weidmann told an audience in Brussels. “The financial market turbulence in Italy over the past week illustrates that.”
He said it would be “tragic” if the reforms and fiscal consolidation achieved during the crisis were rolled back, and he called for more.
German Chancellor Angela Merkel and French President Emmanuel Macron have promised to present a joint plan for overhauling the EU at a European Union summit on June 28-29.
Weidmann backed some of the proposals to be tabled at the summit, such as a common backstop for failing banks, but he reaffirmed his opposition to a joint insurance for deposits until balance sheets are cleaned up.
Reporting By Francesco Canepa; Editing by Gareth Jones