Italy and Britain called on the European Union on Wednesday to promote steps to boost economic growth and not focus solely on austerity to bring down the debt levels that have thrown the euro zone's common currency into crisis.
On his first visit to Britain since taking office in November as the head of a technocratic government, Italian Prime Minister Mario Monti held talks with counterpart David Cameron, who has found himself isolated in the EU after refusing to sign up to a new treaty to tackle the euro zone crisis.
We both believe - the UK and Italy - that adherence to fiscal discipline is a necessary condition for growth. It is not however a sufficient condition, Monti said during a speech at the London Stock Exchange.
And we both believe that not only our individual countries but the European Union as a whole has a big role to play in order to foster economic union in a sustainable way, he added.
Monti was speaking after a closed-door meeting with financiers and investors aimed at assessing international appetite for Italian debt.
He voiced confidence that Rome's measures together with the steps taken by the euro zone as a whole would eventually get Italy off the danger list.
I am rather optimistic now. I see different pieces coming together which lead me to believe we will have some ... coming together of different pieces ... which might allow us even to breathe a bit, Monti said later, taking questions after speaking at the London School of Economics.
He said it would be very difficult for Italy to sustain its efforts to get its fiscal house in order and remove structural constraints to growth without some return, although he did not make clear what that return was.
In a Financial Times interview this week, Monti pleaded for Germany and other creditor countries to do more to help lower Italy's borrowing costs.
We never imagined or imagine now that the return should be money from any particular member state nor any exemption or exception to the framework of (budgetary) discipline, Monti said on Wednesday.
What we need is a sufficiently effective governance system in the euro zone that is able to eliminate the particular risk that markets now associate with the euro zone, he said.
He said common euro bonds could serve a very helpful purpose in the context of an investment-led recovery and said there would be a place for euro bonds in the context of sovereign debt in the slightly longer term.
While it was not good to be in the B class, following rating agency Standard & Poor's downgrading of Italy's credit rating last week, Monti said he was relieved in seeing that much of the downgrading of Italy was due to the negative evaluation of the euro zone governance plus of course Italian factors that can be changed only in the longer run.
He said by downgrading euro zone member states because of poor euro zone governance the ratings agencies made it even more difficult to improve euro governance.
He also took aim at the rating agencies by saying that one thing to look at very carefully is the state of competition in the market of ratings.
Speaking after meeting Monti, Cameron said he hoped the next EU summit at the end of the month would do more to ensure the proper working of the single market.
We can start on January 30 with a really convincing set of steps on digital markets, on services markets, on energy markets, on growth tests, which will help open up all European economies and help those deficit countries deal with their deficits and help those surplus countries also make sure they are growing and expanding at the same time, Cameron said.
Monti, tasked with trying to restore market credibility after the collapse of Silvio Berlusconi's administration, has imposed tough austerity measures and is also seeking to introduce structural reforms to free up the Italian economy.
However, Italy still faces 10-year borrowing costs of around 6.5 percent, widely viewed as unsustainable for an economy with a debt mountain of around 120 percent of GDP. Italy's economy is expected to fall into recession this year.
Monti gave short shrift to a reporter who asked why British taxpayers should provide up to 15 billion pounds in additional funding to help the International Monetary Fund clean up the mess left by Berlusconi and bail out other ailing economies.
To my knowledge, my country has not cost a penny to the UK so far as I know. Nor vice versa. At least in the present historical phase, he said.
(Additional reporting by Adrian Croft, Drazen Jorgic; Editing by James Dalgleish)