Euro zone finance ministers have told France and Italy to take quick steps to rein in their deficits in line with EU rules, threatening disciplinary action but also indicating some wiggle room might be given.Sonia Legg reports
Italy's been in the firing line again over its economy. First came a downgrade by S&P to one notch above junk Then came criticism from the German Chancellor. Angela Merkel told a German newspaper Italy and France should be doing more to meet the euro zone's budget rules. It could have made life a little awkward for German Finance Minister Wolfgang Schaeuble - in Brussels a day later to discuss that very subject. But he took a conciliatory tone. (SOUNDBITE) (German) GERMAN FINANCE MINISTER, WOLFGANG SCHAEUBLE, SAYING: "If you look at the news and what has been done in the countries over the past weeks then you see that Italy,has passed a remarkable reform to its labour market, and France has taken additional measures. We are all on the right track and in Germany we also have to make an effort." To prove his point there was more disappointing data from Germany - this time industry output rose less than expected. The government says it expect to see an overall improvement soon. But Jeremy Batstone-Carr from Charles Stanley isn't convinced (SOUNDBITE) (English): JEREMY BATSTONE-CARR, DIRECTOR PRIVATE CLIENTS SERVICES, CHARLES STANLEY, SAYING: "My fear is that the euro zone's economic engine room is spluttering as well and that of course has negative implications not just for Germany but also for the euro zone, as far as the region's economy goes." The euro zone's finance ministers know they have quite a job on their hands restoring growth - and faith - in the euro zone. CIBC's Jeremy Stretch says Italy's downgrade was a shot across the bows. (SOUNDBITE) (English): JEREMY STRETCH, HEAD OF FX STRATGEY CIBC, SAYING: "I think it's just another negative caveat in terms of the whole euro zone negativity story. As the structural pressures come back to the core of Europe then that means international investors are going to remain pretty shy of holding euros." Italy, France and Belgium are all facing possible fines for not sticking to their budget deficit promises. But judgement has been postponed until March when the gap may not be so big, says the Head of the Eurogroup. (SOUNDBITE) (English) DUTCH FINANCE MINISTER AND EUROGROUP HEAD, JEROEN DIJSSELBLOEM, SAYING: "The difference between 0.1 and 0.5 is indeed 0.4 but whether that gap has to be filled by new measures or simply by talking to the Commission about the valuation of the effectiveness of measures that have already been put on the table, both are possible." The ministers are no doubt hoping signs of growth will make their job easier. For now though that's pretty elusive.