Mercoledì, 26 Settembre 2018

BOI urges govt to make most of deficit-procedure exit


(By Denis Greenan).
Rome, May 31 - The Bank of Italy on Friday urged the
government to make the most of budget savings ensuing from
Italy's exit from the European Commission's excessive deficit
The termination of the procedure opened in 2009,
recommended by the EC earlier this week and expected to be
rubber-stamped by EU leaders at an upcoming summit, is the
"first fruit" to grow from the former government's efforts at
fiscal consolidation and should not be squandered, Bank of Italy
Governor Ignazio Visco said.
"The exit from excessive deficit procedure...should be
considered an investment on which to build," Visco told the
central bank's annual meeting in Rome.
Former premier Mario Monti's government introduced strict
budget measures that led to an EC decision this week to close
the procedure.
That is expected to free up about eight billion euros for
the current government in the 2014 budget.
Visco also said the government must act quickly to
reduce taxes over the medium term to stimulate the economy.
Immediate action is needed because high taxes are "holding
back employment and business activity," he said.
Taxes that affect productivity should be first on the
chopping block, he added.
Italy has been slow to react to deep structural changes in
the global market place, Visco went on to say.
Over the past 25 years, Italy has failed to take part in
enormous marketplace restructuring and must now act fast to
catch up, he said.
"We were not able to respond to the extraordinary
geopolitical shifts in technology and demographics of the last
25 years," Visco told the central bank meeting.
That is now taking an enormous toll on the Italian economy
and government policy reform is essential to catch up and
stimulate an economic recovery, he said.
In other remarks, the central banker said interest-rate
cuts by the European Central Bank have been effective and the
ECB stands ready to cut again if necessary.
Cutting rates to increase liquidity in the eurozone, "has
proven effective," Visco told the meeting.
But more may be needed, he added.
"The ECB is examining, in concert with other European
institutions, initiatives to promote issues of securities backed
by loans to businesses".
Visco also called for measures to "break the negative
spiral" in credit availability in the economy, the result of a
drop in the amount of lending by nervous banks to businesses.
At the same time, companies have been increasingly afraid
to borrow, leading to economic stagnation.
Visco spoke amid more gloomy news for the economy as the
unemployment rate hit a record high of 12.8% with youth
joblessness reaching an unprecedented 41.9%.

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