(BRUSSELS) - Prime Minister Silvio Berlusconi decided Sunday to call an emergency cabinet meeting after EU leaders pressed him to fulfill pledges to cut Italy's huge debt and stop eurozone debt contagion. While insisting that Italy was "absolutely not at risk," Berlusconi said the cabinet would meet Monday to try and plough through reforms, notably in the pensions system. "I wish to take advantage of this situation to see if we can advance measures I was unable to implement up until now due to differences within the majority," he told reporters after a European Union summit.
Before the summit, the Italian premier held one-on-one talks with EU president Herman Van Rompuy and another meeting with German Chancellor Angela Merkel and French President Nicolas Sarkozy. "We have to reassure investors and reassure other states," Van Rompuy told a news conference. "Clearly, we are asking for a major effort on the part of the Italian authorities and I think they are ready to do it." With another EU summit on the eurozone debt crisis scheduled for Wednesday, Van Rompuy said leaders would work "hand-in-hand" with Berlusconi in the coming days to make sure Rome "implements what it promised."
Merkel called for Italy to act credibly to reduce its colossal 1.9 trillion euro debt, equal to 120 percent of its gross domestic product. The EU's limit under a pact originally drawn up to ensure stability and growth is supposed to be 60 percent. "Italy is a great economic force but Italy also has a very high level of debt and it must be reduced in a credible way over the coming years," she said. "That's what we expect of Italy." Italy emerged as a new source of worry for EU leaders at the summit, dedicated to finding an agreement on saving Greece from financial collapse, recapitalising European banks and boosting the eurozone's rescue fund.
Berlusconi, a billionaire media mogul, quipped that he "never flunked (an exam) in my life" as he emerged from the talks with Merkel and Sarkozy. But diplomats said Berlusconi lacks credibility in the eyes of his European Union partners, who are telling him to follow the example of Spain, which is biting the bullet with tough austerity measures. Calling for "more details and timetables" from Italy, Van Rompuy said Rome needed to press ahead with reforms of its labour market, public companies and the fight against tax fraud. Budget cuts adopted by the Italian parliament in July and September aim to bring the country back into balance from 2013 and reduce its debt. But European officials believe Italy has slipped back on its commitments since August, when the European Central Bank moved to support Rome by buying up its debt on the financial markets.
The European Commission last week pressed Italy to move on cuts in public spending and structural reforms "as a matter of urgency." The irritation is all the greater given that Europe is battling to protect Italy and Spain, its third and fourth largest economies, against contagion from the debt crisis.
Another row haunted Berlusconi at the summit, with France complaining about Rome's over-representation at the European Central Bank. France will be left without a seat on the powerful six-member executive board with the departure of ECB chief and Frenchman Jean-Claude Trichet in November, when Italian central bank governor Mario Draghi takes over. The other Italian on the board, Lorenzo Bini Smaghi, has refused to resign after the Italian leader did not name him to head Italy's central bank.
"Sarkozy took me to task because of Lorenzo Bini Smaghi's refusal to resign," Berlusconi said, adding that the banker refused offers to take up important jobs as consolation. Admitting his inability to force Bini Smaghi out, Berlusconi said: "At one point I asked Sarkozy: 'What should I do, kill him?"