Euro bonds necessary, inevitable: Tremonti

ITALY: Joint euro zone bond issuance is the only way to solve the region's debt crisis and to invest in the future and it is only a matter of time before it is adopted, Italian Economy Minister Giulio Tremonti said on Saturday.

"The strong idea that must be supported is euro bonds," Tremonti said at a conference in the Italian coastal town of Rimini.

Common debt issues by euro zone nations are "an idea whose time is arriving, progressively, but it is arriving," he said.

Tremonti has long been a supporter of so-called "euro bonds" but they are strongly opposed by Germany, which says they would be a disincentive for fiscally undisciplined states to fix their public finances.

In a speech peppered with historical references which took several swipes at Germany, Tremonti dismissed the opposition to euro bonds as "bizarre", and said they were a way to consolidate finances and promote growth at the same time.

"The only way to invest in our future is euro bonds," he said.

Germany's punitive approach to the debt crisis created the risk of a "Versailles in reverse", he said, a reference to the treaty that forced Germany to pay reparations after World War 1, which many historians say sowed the seeds of the next war.

He said Germany should remember that it exports more to the weaker euro zone states than it does to China.

"Do you want to throw all this away," he asked, calling for Germany to show solidarity and adopt "a strategic vision of the future" rather than focus on its short-term interest.

Tremonti also reiterated attacks on central bankers and regulators he said had failed to address the causes of financial crisis.

He said these unelected officials had insisted that they, rather than politicians, should tackle financial reform because it was "complicated", and the result was that "for three years they have pretended to draft new rules".

"They haven't proposed a single serious reform, in fact they have done the opposite, they have legitimised the existing system," said Tremonti, who has often had tense relations with Europe's Financial Stability Board President Mario Draghi.

Draghi is also the governor of the Bank of Italy and will head the European Central Bank from November.

Tremonti said credit default swaps were a prime example of the absurdity of the financial system, but instead of abolishing them, regulators insisted on tinkering with an instrument which was "false in itself".

"Does it seem reasonable that a system exists that insures against the risk of the end of the world?" he asked.

"But our technocrat geniuses haven't explained to us that this system doesn't stand up, instead they have told us that it will work better with an automatic platform."

Tremonti declined to answer any questions from reporters about the government's austerity programme, which was drawn up in mid-August at the insistence of the ECB and is currently being amended in parliament.

Copyright Reuters, 2011