The Italian and French leaders on Thursday found common ground on how to confront Europe's worsening debt crisis, emphasizing that budget discipline should not come at the expense of economic growth and calling for a region-wide move to boost market confidence.
The leaders held their first bilateral meeting since President Francois Hollande took office last month as Italy's borrowing costs skyrocketed on concerns the country may be the next, after Spain, to need financial aid.
The positions outlined by Italian Premier Mario Monti and Hollande, however, were at odds with those espoused by Chancellor Angela Merkel.
Europe's crisis response `'has not been enough to protect the euro from market turbulence," Monti said. "We need to reinforce the weak points of the system" in both the real economy and finance.
The two leaders agreed that focusing on growth does not mean abandoning budgetary discipline.
`'But public account discipline is not enough to have growth, foster development and create jobs," Monti said.
The two men also discussed launching eurobonds, jointly issued bonds that would spread debt risk that both support. Germany opposes the bonds out of concern they will lead to fiscal laxity.
Monti pointedly noted that Italy and France have together contributed 40 percent of the eurozone's bailout funds to date, staking a claim for the legitimacy of their views.
The need for action to boost market confidence in the euro was evident in the bond market movements on Thursday.
Italy paid 5.3 percent to raise (EURO)3 billion ($3.76 billion) in three-year bonds from financial markets, up from 3.91 percent last month and the highest level since December.
The high rate underscores how investors are increasingly worried Italy will be destabilized by market turmoil in Spain and might run into trouble servicing its debt as it wallows in a deep recession. Political wrangling over reforms has also raised questions over the government's ability to overhaul the economy.
To boost confidence in the euro, Hollande said a solution must be forged not just between France and Italy, but with other countries ahead of a European summit on June 28.
"Growth is the first thing, the second is stability ... the third point is deepening euro monetary union," Hollande said.
Monti's technocratic government came to power in November with broad, bipartisan support from political parties to reform the economy. However, lawmakers have in recent weeks shown signs of returning to the old Italian ways of political jockeying. Lobbies and some parties have pushed to water down some reforms.
The lower house of Parliament passed a package of anti-corruption measures aimed at making Italy a more just society _ something that Monti, a former EU competition commissioner, believes will help encourage more risk-taking and enterprise-building. After being bruised on labor reforms, Monti's government attached the package to three votes of confidence on the most contentions passages, all of which easily passed lower house votes.
Despite the passage, there were many calls for changes when the Senate takes up the package _ an indication of more political gridlock