By Simon Miller
The Italian prime minister Mario Monti has warned that Germany would be scoring an "own goal" if it blocked plans for the European Central Bank (ECB) to shore up eurozone nations' borrowing costs.
In a shot across German chancellor Angela Merkel's bow, Monti warned that if Germany blocked plans for the ECB to get nation borrowing costs under control, Germany could find itself facing a serious inflation threat.
Speaking to Italian newspaper Il Sole Ore, Monti commented: "It would certainly be fair to point out that while the imbalance (between German and Italian borrowing costs) is a serious issue for us, it's also a risk for countries that seem to benefit."
He added: "The current configuration of spreads has created growth in Germany's M3 money supply, which has resulted in artificially low interest rates, rising bond prices and upward pressure on house prices. This results in a potential inflation risk in Germany, which I don't think corresponds to the desires of the European Central bank nor to the desires of Germany."
Monti said preventing the ECB from intervening in bond markets, as the Bundesbank wants to do, could result in an own goal "from the German point of view, with paradoxical effects".
Despite borrowing costs falling over August, Monti cautioned against reading too much into it.
"The August was often negative for the markets and Italy. This time the opposite seems to have been the case. But I would be cautious: today is 28, there are still three days at the end of the month," he told the newspaper.