Jan. 11 - German Chancellor Angela Merkel praised Italy's new government for the speed with which it has launched reforms, as she met for the first time with Prime Minister Mario Monti since he took power.
It started two years ago but European leaders are still trying to get a grip on the debt crisis. In 2011, Italy's economic woes were thrust into the spotlight and it got a new leader. Now Prime Minister Mario Monti is visiting Berlin for his first talks with Europe's paymaster. He's been discussing his austerity measures with German Chancellor Angela Merkel. SOUNDBITE: Italian Prime Minister, Mario Monti, saying (Italian): "This was a very mature attitude by Italians, and it doesn't merit a reward from Europe, because the measures we adopted were adopted in the interest of the Italian people, but it does merit a recognition by Europe that it doesn't have to fear any more that Italy is a possible source of contagion for Europe." Angela Merkel praised Italy's speed at bringing in its reforms, as Monti aims to make the economy more competitive. But Rome still faces borrowing costs of around 7 percent - widely seen as unsustainable for an economy saddled with debt of around 120% of GDP. Italy says it's committed to EU's move toward fiscal union - but that's just one entry on Europe's to-do list this year. SOUNDBITE: German Chancellor Angela Merkel, saying (German): "The euro zone's first obligation this year is to resolve a second Greek programme and finalise these negotiations with the banks so that we can then concentrate on structural problems in the euro zone." Meanwhile in France President Nicolas Sarkozy was meeting an old acquaintance - formerly his Finance Minister now Head of the IMF Christine Lagarde. She is holding a series of meetings in Europe on the debt crisis. She didn't make any comments after the meeting - but last week Lagarde said she thought the euro currency was likely to survive 2012. But such statements don't seem to have reassured investors. A recommendation from ratings agency Fitch that the European Central Bank should increase its purchases of euro zone debt to prevent a "cataclysmic" collapse of the euro - saw investors sell off stocks and head to the safe haven of German government bonds. And that doesn't bode well for Italian and Spanish bond auctions later this week. Joanna Partridge, Reuters