Italy's PM: 'We have a week to save the euro'

Over the last couple of years, we've heard this warning from a variety of european officials -- we have a week, or two weeks, or ten days to save the project unless some specific action is taken.

Well, the week or two or ten days goes by and nothing much happens. Is Italy's Prime Minister Mario Monti just trying to gain headlines? Or, when he says we have a week to save the euro, is that an accurate reflection of the current state of affairs?

Disturbingly, he may be spot on this time. A summit meeting next week featuring the top 4 european economies will meet to discuss how to deal with the growing debt and banking crisis.

The Guardian:

Speaking to the Guardian and a group of leading European newspapers, Monti said that, without a successful outcome at the summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries". The attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt".

Monti warned: "A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth."

Outlining the result of a failure at the talks, Monti said that, faced with creeping economic paralysis, "the frustration of the public towards Europe would grow", creating a vicious circle. "To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed," said Monti. Yet, if the summit failed to resolve the problems quickly, "public opinion, but also that of the governments and parliament... will turn against that greater integration".

Monti said he could see the beginnings of the process "even in the Italian parliament, which has traditionally been pro-European and no longer is".

He made his remarks hours after his predecessor, Silvio Berlusconi, acknowledged that his party had bled support because of its backing for the Monti government's unpopular budgetary measures and spoke openly for the first time of the electoral advantage it could derive from torpedoing Monti's non-party cabinet of technocrats.

Monti signalled that the key eurozone leaders were working on a plan designed to halt the spread of debt contagion while satisfying Germany's refusal to sanction financial irresponsibility. The plan, he said, was one of the "absolutely necessary" outcomes of next week's summit.

The backdrop of this summit is unlike any other since the crisis began. Greece says it needs two extra years to get its budget deficit under control - a prospect that is not likely. Spain needs at least 62 billion euros to plug the leaks in its banking sector - and the possibility that Spain will also need a bailout of its bonds whose interest rates are soaring above 7% for some instruments.  Italian banks aren't in much better shape than Spain's and it too, is experiencing near record interest rates on its bonds.

It would seem that Mr. Monti is not overstating the danger at this point in time to the euro. Whether anyone listens to him is another story.