Monti vs Rajoy

While Sandy is causing problems in the US, Europe has its own little Sandy. Rajoy and Monti are meeting in Madrid today. This could prove interesting , as these gentlemen are not the best of friends. From Bloomberg.

Italian Prime Minister Mario Monti and Spanish counterpart Mariano Rajoy may try to mask a growing divide over Europe’s new bailout strategy when they meet in Madrid today.

While both have jointly argued against extra budget austerity as the price for help from theEuropean Central Bank, their interests diverge when it comes to whether they should ask for assistance together. A go-it-alone strategy by Spain would probably cut Italy’s borrowing costs while leaving Rajoy to weather the political flak of seeking emergency funds.

“Rajoy was probably pressed by Monti in August to accept a pre-emptive” bailout, said Gilles Moec, co-chief European economist at Deutsche Bank AG in London. “It would have made things so much smoother in Europe and for Italy as well. Rajoy is very much following his own route now.”

European officials are waiting for Spain to trigger a bailout plan unveiled by ECB PresidentMario Draghi last month and designed to draw a line under the region’s debt crisis. While Draghi’s plan to buy potentially unlimited quantities of government debt has soothed markets for now, a botched Spanish rescue could still trigger further turmoil.

And over the weekend Draghi tried explaining that unlimited phrase to Spiegel.

“Unlimited does not mean uncontrolled,” he said in an interview with Spiegel released yesterday. “We will only buy bonds from those countries that accept strict conditions, and we will check very carefully whether those conditions are adhered to.”

Telling the magazine “we take the worries of the people very seriously,” Draghi also said he saw no current risk to price stability and underscored the prospect of profits for German taxpayers from ECB purchases of debt.

Full article here.