Angela Merkel appeared on Saturday to rule out debt relief for Italy, saying in a newspaper interview that the principle of solidarity among members of the euro zone should not turn the single currency bloc into a debt-sharing union.
Merkel made the remarks in an interview with the Frankfurter Allgemeine Sonntagszeitung when asked about a media report that the anti-establishment 5-Star Movement and far-right League had planned to ask the European Central Bank to forgive 250 billion euros ($296 billion) of Italian debt.
She said that while solidarity among members of the single currency bloc was important “solidarity among euro partners should never lead to a debt union.” An Italian governing coalition of two parties generally seen as hostile to the euro took power on Friday, calming markets that had been spooked by the possibility of a new election that might have effectively become a referendum on whether to leave the single currency.
Italy, one of the world’s largest economies, already has a huge 132 percent debt to GDP ratio – second only to Greece on 180 percent. Any moves to up its spending could lead to a downgrade by credit agencies, potentially triggering a financial crisis in the country and spreading around the EU.