UPDATE 1-Italy's Monti presses for joint EU action on debt
ROME, June 26 (Reuters) - Prime Minister Mario Monti promised on Tuesday to press for joint action by European Union countries to help ease pressure on Italian bonds, risking a showdown with Germany which has refused to share the burden of other countries' debt.
Speaking in parliament ahead of an EU summit on Thursday and Friday, Monti repeated his call for more growth measures to complement the budget discipline demanded of countries struggling to rebuild their public finances.
"Common European solutions are needed to prevent some member states sliding into a trap of recession, in which austerity reduces growth and increases debt, making further cuts necessary and reducing demand," he said.
"The awareness of what is at stake is emerging slowly, that everyone needs to be disciplined in their own house but that this is not sufficient because there are systemic faults."
Speaking a day before a meeting in Paris between German Chancellor Angela Merkel and French President Francois Hollande, Monti said agreement between France and Germany was necessary but not sufficient.
"We have seen in the recent past accords between France and Germany that did not go in the right direction," he said. Monti declared he would not rubber-stamp general, pre-prepared declarations but would press for concrete measures to boost growth and contain gathering market tensions.
He said he would repeat his call for the European Financial Stability Facility and the European Stability Mechanism, the two funds set up to provide a "firewall" against the spreading debt crisis, to be used to help ease the pressure on Italian debt.
Borrowing costs on Italian bonds have risen sharply as worries about the stability of Spanish banks and Italy's own towering 1.95 trillion euro public debt have increased worries about the future of the euro.
Yields on Italy's 10-year bonds have climbed past 6 percent while the spread or risk premium over benchmark German Bunds has widened to 468 basis points, levels generally considered unsustainable in the long term.
Italy is proposing to use the funds to help limit the spreads over German Bunds on bonds issued by countries that respect EU budget rules.
"Italy can allow itself today and should ask for a mechanism which is applicable not to those countries which need to be helped because they can't manage things but for those which have fully respected their obligations with regard to public finances," he said.
The proposal has run into stiff opposition from Germany, the largest economy in the European Union and the bloc's effective paymaster, and has been rejected by Jens Weidmann, the powerful head of the German central bank, the Bundesbank.
Monti said he was surprised by what he called Weidmann's "misunderstanding" of the proposal, which he said was not a means of lessening pressure for budget discipline.
"It is being asked for by a country which has already done it and which does not intend to ask for the help reserved for those countries which have not followed this severe cure."
Monti said the summit promised to be "very difficult" but he pledged to do everything possible to reach agreement that would calm uncertainty about the future of the EU.
He said he was prepared to remain beyond the scheduled end of the European Council meeting and the euro summit to work into Sunday evening if necessary to come up with a strong package to reassure markets on Monday.
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