June 12, 2018 / 8:53 PM / 6 months ago

Italy's Savona says euro 'indispensable,' praises Germany

ROME (Reuters) - Italy’s new minister for EU affairs sought to reassure investors and other European capitals on Tuesday about the government’s stance on monetary union, saying the euro was “indispensable”, and denying he ever suggested leaving the single currency.

European Affairs Minister Paolo Savona gestures as he holds a news conference at the Foreign Press Club in Rome, Italy June 12, 2018 REUTERS/Alessandro Bianchi

The anti-establishment coalition now in power had originally tapped Paolo Savona for economy minister, but Italy’s president vetoed his nomination due to hostile views he expressed on the euro, saying Italy’s decision to join was a “historic mistake”.

In a meeting with the foreign press on Tuesday to present a book he wrote before becoming a minister, Savona was at pains to stress that he fully backed the euro and did not want to prepare for Italy to quit the single currency.

Asked if he saw any positive aspects about the euro, he called it “indispensable”, but said the currency union needed to be “perfected” with reforms to its system of governance.

“The European Central Bank should be given a new statute similar to those of other central banks like the (U.S.) Federal Reserve,” Savona said, calling for it to have greater control over foreign exchange policy.

“We send (ECB President Mario) Draghi around the world hobbled because he can’t intervene on exchange rates, it’s fundamental that the ECB should be able to act on exchange rates.”

Savona, an 81-year-old former economics professor, stressed his admiration for Germany, which he had criticized before becoming a minister, saying in his book it was seeking to dominate Europe through its control over EU economic rules.

“Germany is a great country from many points of view, culturally, economically and politically,” he said, though he did not deny that he had a different vision from that of many German economists.

“They tend to see stability as a necessary condition for growth, while I am part of a group who sees growth as a necessary condition for stability,” he said, calling for the euro zone to do more to increase public investments.

In his book, Savona wrote that Italy needed a “plan B” to prepare an orderly exit from the euro if necessary, but on Tuesday he stressed that he had been writing as an “analyst” and had never been in favor of leaving.

“There is no plan B and I never asked to leave,” he said, while declining to ask a direct question about whether it would still be wise to have a “plan B” if it proved impossible to agree reforms to euro zone governance.

Underscoring his pro-euro credentials, Savona said he had no disagreements with the new Economy Minister Giovanni Tria who gave a strongly pro-euro newspaper interview on Sunday that calmed nervous financial markets.

“I congratulated Tria on the interview,” Savona said.

(This version of the story has been filed to correct “tend to see stability as a necessary condition for growth” in paragraph 9)

Editing by Gareth Jones

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