REPEAT: MNI: Italy Looks To Germany To Reshape EMU: Official

Repeats Story Initially Transmitted at 16:19 GMT Feb 6/11:19 EST Feb 6

--Rome Hopes New Politics in Berlin Will Help Push Eurozone Reform

--Italy Gentiloni To Use Wednesday Berlin Speech To Underline Reforms

By Silvia Marchetti

     ROME (MNI) - Italy is looking towards Germany for help reforming the

eurozone, despite both countries facing similar domestic political difficulties,

MNI has learned. 

     Italian prime minister Paolo Gentiloni's meeting in Berlin on Wednesday

with German chancellor Angela Merkel "falls just at the right moment and will

advance talks on a common EU agenda," a senior government official told MNI in

exclusive comments.

     "A preliminary deal to form a new German government appears to have finally

been reached, and Rome is satisfied that one key message is to invert the so-far

orthodox austerity stance of Berlin, apparently also willing to increase funding

to the European budget," said the official, a close adviser to Italy's premier. 

     The timing of Gentiloni's visit is perfect, he argued, as Italy heads

towards elections in less than a month and is likely to face its own post-vote

coalition-building turbulence, just as Germany has experienced in recent months.

     "The birth of Germany's centrist, grand coalition is a positive message

that raises hope. Rome and Berlin are looking towards one another as beacons of

light amid the mist of electoral chaos," said the source. 

     "Italy is likely to face the same problems in forming a ruling coalition

among different parties after the March 4 vote. However, we're confident that by

end of March both Rome and Berlin will have new governments that will work

together for another 5-year legislature on key European reforms," he added.

     --ROME-BERLIN UNITY

     Gentiloni will deliver a key speech at Humboldt University on Wednesday,

outlining the eurozone's makeover that is "already underway". The speech will

likely to focus on what "unites" Germany and Italy and on the progress made in

overcoming obstacles that have halted the European integration progress.

     Germany has so far opposed greater burden-sharing among members, slowing

the completion of the banking union, but Italy is now confident that a new, more

lenient German government will ease its position on sovereign debt and

bank-related burdens.

     "Berlin has always demanded that in order to move forward with the monetary

and banking union, risk reduction and prevention be prerequisites for risk

sharing," noted the official.

     "We believe that the two must go hand in hand and Berlin is starting to

acknowledge this by seeing that our public debt is finally declining," he added.

     The official expressed confidence now Berlin is breaking out of the

political impasse and able to focus on eurozone reform, a "middle way" could be

found to deal with risks across the bloc will ultimately be reached at EU level.

     There's also another issue at stake that concerns Rome, reflecting the

"balance of power" within the union, said the official.

     --FRENCH COUNTERWEIGHT 

     Despite strengthened ties with France, Italy has interest in teaming up

with Berlin to counteract president Emmanuel Macron's recent "hyper-activism" on

the European stage, who, they feel, has been attempting to exploit the "void"

caused by the German political stalemate as "trigger for change across the

bloc". 

     In the still fragile nascent economic recovery, both Rome and Berlin also

share the need to focus Europe-wide policies on investment support and measures

to boost internal consumption rates. 

     "Issues that have divided us are decreasing, while those that unite us are

rising," said the official, who argued,however, that any privileged cooperation

with Berlin was strictly linked to Gentiloni's "credibility" on the global

stage. 

     Despite not commenting on whether Italy's incumbent premier might be

re-confirmed for a second mandate if the centre-left wins the upcoming election,

the source stressed that "only another Democrat-led government can pursue this

reform path in Europe alongside Germany and France". 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com