BERLIN (Reuters) - German Finance Minister Wolfgang Schaeuble has said he does not believe Italians rejected the euro in their strong vote against austerity policies in last month's election.
Urging Italy's leaders to stick with the economic overhaul started by outgoing Prime Minister Mario Monti, Schaeuble said: "I do not think that the euro or Europe or even the economic policy of the Monti government were the decisive factors behind the election result."
Merkel's challenger for the chancellor's job in Germany's election in September, the Social Democrats' Peer Steinbrueck, caused irritation in Italy and embarrassment in Germany last week when he described anti-establishment politician Beppe Grillo and former Prime Minister Silvio Berlusconi as "clowns".
But in an interview with Austrian daily Der Standard published on Saturday, Schaeuble emphasized Italy's efforts to control its sovereign debt burden, one of the world's biggest.
"Italy has steadily improved its competitiveness with the structural reforms of the past one and a half years, it has improved its financial position and won the trust of the markets. That is the right policy, regardless of the outcome of the elections," he said.
"It would therefore be wrong to change the path now. There is a politically complicated situation in Italy now, we know that, but the Italians will have the strength to form a government out of this," Schaeuble added.
The pro-euro center-left won a majority in Italy's lower house but not in the upper house Senate in the February poll, raising the prospect of fresh elections in a few months' time.
Reinforcing market concerns over the political stalemate, rating agency Fitch cut Italy's credit rating on Friday. Italy has been in recession since the middle of 2011.
Grillo wants a referendum on Italy's membership of the euro bloc while Berlusconi has criticized what he sees as German economic "diktat" in the currency bloc.
Schaeuble and Chancellor Angela Merkel strongly backed Monti's policies and have been cautious in their comments since the election for fear of bolstering his opponents.
But Rainer Bruederle of the Free Democrats, the junior partner in Merkel's center-right coalition, voiced a widely shared German fear this week when he said Italy may decide to exit the euro or take other drastic action.
(Reporting by Gareth Jones; Editing by Ruth Pitchford)
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