* Chancellor confident Italy will carry out reforms
* Merkel spoke with Berlusconi
* Germany agrees Greece needs new bailout quickly
(Adds quotes and background)
BERLIN, July 11 German Chancellor Angela Merkel
said on Monday that Italy must demonstrate it is undertaking the
budget reforms required to restore confidence in the euro zone,
and she was confident that it would do so.
"Italy must itself send an important signal by agreeing on a
budget that meets the need for frugality and consolidation," she
told a joint news conference with Icelandic Prime Minister
Johana Sigurdardottir in Berlin.
"I have full confidence that the Italian government will
pass exactly this kind of budget, I discussed this yesterday
with the Italian premier," said Merkel.
Merkel added that Germany agreed with other leaders of the
euro zone that Greece needed fast approval of a second bailout
package and her country would, with the rest of the European
Union, do everything needed to defend the euro currency.
"Germany and all euro partners are steadfastly determined to
defend the stability of the euro," she said. "Regarding Greece,
I would like to say it must get a new programme very quickly,
within a very short time frame."
Top euro zone finance officials are holding critical talks
on Greece and the worsening situation in Italy on Monday, with
concerns about the risk of further sovereign debt contagion
(Reporting by Stephen Brown, Sarah Marsh and Gernot Heller)