Words of praise

German Chancellor Angela Merkel said Wednesday she had "great respect" for recent economic reforms passed by Italy's interim government, stressing to Prime Minister Mario Monti in Berlin that Rome would be "rewarded" for them - as the crisis-hit country battles to reduce its debt.

"I think [the reforms] will strengthen Italy, will improve its economic prospects and we have watched with great respect how quickly they have been implemented," Merkel told journalists at the Chancellery after meeting Monti.

"I think that, overall, the work of the Italian government will be rewarded and I have said from the beginning that we should work very, very closely together," the chancellor added.

From his side, Monti said he hoped that "the implementation of good policies would translate to sensible rates" as Italy's borrowing costs remained above the critical seven-percent mark seen as unsustainable.

Monti said that he had explained to Merkel in their talks the "current state of the Italian people," praising their reaction to the 33-billion-euro ($42 million) austerity package as a sign of "collective maturity."

Different tone

Monti's statements reflected a different perspective than that published in interviews earlier on Tuesday, when the prime minister threatened that anti-European sentiment was growing in his country - especially towards Germany - due to the European Union's failure to acknowledge their austerity efforts.

Monti complained to the German daily Die Welt of possible "anti-European" protests in his country if Rome's reform efforts were not recognized adequately.

"The problem is that despite our sacrifices, we have not got anything in return from the European Union, such as a drop in interest rates. Unfortunately, we have to say that our reform policies have not received the recognition and appreciation in Europe that they deserve," he said.

"If the Italian people do not soon see tangible success for their savings and reform efforts, there will be a protest against Europe, against Germany - seen as the driver of EU intolerance - and against the ECB (European Central Bank)."

Monti moderated his comments at the conference with Merkel, saying Italy was not looking for any "recognition" and that the reforms that his country had implemented were "for their own good, and not for Europe."

Crippling debt

To be true, Italy continues to suffer from alarmingly high levels of sovereign debt. After taking over for Silvio Berlusconi late last year, Monti has pushed through a biting plan to fix the nation's problems - but there is still concern over its impact on an economy that is moving into recession.

With that said, however, Italians received a boost on Wednesday from fresh data showing the country's public deficit had fallen to its lowest level since the fourth quarter of 2008, according to the Istat data agency.

Under pressure from the European Union, IMF and international markets, Rome has pledged to balance its budget by 2013. At present, Italy's total accumulated debt is over 1.9 trillion euros, or 120 percent of GDP.

Author: Gabriel Borrud (AFP, Reuters, dpa)
Editor: Michael Lawton