Giovedì, 18 Ottobre 2018

Cut taxes to boost economy, says Bank of Italy


Rome, May 31 - Government must act quickly to
reduce business and labour taxes to create employment and
stimulate the economy, Bank of Italy Governor Ignazio Visco said
Immediate action is essential because high taxes are
"holding back employment and business activity," Visco told the
central bank's annual meeting in Rome.
The cuts may take effect over the medium-term, and taxes
that affect productivity should be first on the chopping block,
he added.
The governor's speech came at the same time the national
statistics agency Istat reported that unemployment in
recession-hit Italy reached 12.8% in the first quarter of 2013,
the highest since the first quarter of 1977.
One reason for the troubled economy and sluggish
productivity is the fact that over the past 25 years, Italy has
failed to take part in enormous marketplace changes and must now
act fast to catch up, Visco said.
"We were not able to respond to the extraordinary
geopolitical shifts in technology and demographics of the last
25 years," he added.
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.
The Italian government has one advantage, the governor
Italy's exit from the European Commission's excessive
deficit process is the "first fruit" to grow from the former
government's efforts at fiscal consolidation and should not be
squandered, Visco said.
"The exit from excessive deficit procedure is the first
fruit...It should be considered an investment on which to
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.
Meanwhile, interest cuts by the European Central Bank have
been effective and the ECB stands ready to cut again if
necessary, Visco said.
Cutting rates to increase liquidity in the eurozone, "has
proven effective," he said.
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 are increasingly afraid to
borrow, leading to economic stagnation.

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