#Eurozone: Italy to Host Meeting on Crisis - doubtful it will add up to much...

doubtful it will add up to much...

Eurozone: Italy to Host Meeting on Crisis

Summary


Italian Prime Minister Mario Monti (L) and Spanish Prime Minister Mariano Rajoy (C) watch German Chancellor Angela Merkel and French President Francois Hollande (R)
The leaders of Germany, France, Italy and Spain will hold an informal summit June 22 in Rome. The meeting's main purpose is to more closely align the positions of the eurozone's top four economies before the June 28-29 EU summit.

Stratfor expects the four leaders to reach an agreement on measures such as the release of project bonds, the redirection of existing EU structural funds and the expansion of the European Investment Bank (EIB) capital base. These proposals are designed to provide capital for infrastructure projects in struggling EU countries and thus should provide a degree of stimulus to their economies. Because these measures do not involve significant changes in the EU framework or the use of large amounts of additional funding from member countries, a quick agreement is highly likely.

However, the proposed measures will not relieve Spain's and Italy's high bond yields. More important, they do not resolve the fundamental contradiction between France, which believes deficits can be tolerated if they increase economic activity, and Germany, which is concerned about the solvency and fiscal responsibility of most of its economic partners. This basic contradiction is leading the European countries to take sides  -- and some are already changing alliances.



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