BERLIN, June 8 (Xinhua) -- German finance minister Olaf Scholz offered words of reassurance to investors on Thursday night that fears sparked by the recent inauguration of a new populist government in Italy are overblown.
Speaking during an appearance on public broadcaster ZDF, Scholz expressed confidence that the governing cabinet in Rome formed by the Five Star Movement and Lega Nord (Northern League) parties would neither default on Italian sovereign debt, nor leave the eurozone.
"I am absolutely certain that Italy will not fail," Scholz said.
The minister admitted that Italian policymakers faced a number of challenging issues, including a sovereign debt to gross domestic product (GDP) ratio of 130 percent. Nevertheless, Scholz rejected suggestions Rome could use this circumstance to "blackmail" either Germany or the European Union (EU) as a whole.
"I think we can observe the unfolding situation calmly," the minister told ZDF. He argued that ideas mooted on the campaign train by the two parties to unilaterally default on Italian sovereign debt were "no longer being pursued" and hence did not merit any further attention.
While ruling out debt relief to Italy in the form of a haircut imposed on public and private sector creditors, Scholz was open to devising new means of assisting crisis-stricken members of the European monetary union with short-term loans and creating a Eurozone budget facility towards this end.
As long as principles of "solidarity" and "responsibility" were evenly balanced, the minister predicted that an agreement on related EU reforms could still be reached before the summer.
