Italy and France must cut deficit, says EU president

(AGI) Rome, Dec 10 - Italy and France must honour theirpromises of reforms and comply with the EU Stability Pact,otherwise "the consequences will not be pleasant", warnedPresident of the European Commission, Jean-Claude Juncker. "Weneed to trust the Italians and French, and then we'll see,probably in March, how it went," he told German newspaperFrankfurter Allgemeiner Zeitung in defence of the decision togive the countries more time to right their accounts. "Withoutthe measures announced, there will be a worsening of theexcessive deficit procedure." Rome and Paris passed the firstjudgment by Brussels on

(AGI) Rome, Dec 10 - Italy and France must honour theirpromises of reforms and comply with the EU Stability Pact,otherwise "the consequences will not be pleasant", warnedPresident of the European Commission, Jean-Claude Juncker. "Weneed to trust the Italians and French, and then we'll see,probably in March, how it went," he told German newspaperFrankfurter Allgemeiner Zeitung in defence of the decision togive the countries more time to right their accounts. "Withoutthe measures announced, there will be a worsening of theexcessive deficit procedure." Rome and Paris passed the firstjudgment by Brussels on the 2015 budget with a temporarypromotion. A further assessment will be made in March and thenthe commission could make an official request for more action.Austerity remains the guiding star of the eurozone as anexhausted Greece moves back into the sights of the markets.Investors fear calling presidential elections early will endwith the defeat of the candidate proposed by Prime MinisterAntonis Samaras and a snap election. This scenario, accordingto the polls, would end with a victory for the far left Syrizaparty, which has promised a radical renegotiation of theagreements. This is a worrying prospect for the markets, whichsent a signal as disturbing as the collapse of the Athens StockExchange on Tuesday. Greek debt now has rates on short-termbonds exceeding those on long-term ones, the three-year bondtouched a record 9.2 percent compared with 8.2 percent for the10-year one, which is considered a harbinger of a default.Brussels finds itself again flirting with the prospect of aGreek collapse, but the strategy doesn't seem very clear inFrankfurt. On Wednesday the governor of the central bank ofEstonia, Ardo Hansson, one of the closest allies of theBundesbank, rejected the possibility of a U.S. stylequantitative easing plan. It would have involved buyinggovernment bonds, but he said it risks financial stability. Hewent on: "I have examined the programme and said that it wouldlead governments to increase their deficits, so I think it isan extreme case." This means that the staff of the EuropeanCentral Bank have already prepared a model for monetary easingand submitted it, albeit informally, to the members of thegoverning council. (AGI) . .