The Italian economy is gradually
recovering after years of weakness but the country still needs
more and faster reforms as well as greater innovation, Bank of
Italy Governor Ignazio Visco said Tuesday.
In releasing the central bank's annual report, Visco said
that the economic recovery which began with 0.3% growth in the
first quarter should strengthen in the coming months.
He described 2014 as "a year of difficult choices" but also
a launching point for growth and that will be boosted by reforms
in the economy.
The Italian economy has just begun to emerge from a long
period of stagnation and at times, recession.
"The economic recovery that got under way in Italy in the
first quarter of this year is likely to strengthen in the
current and subsequent quarters," said Visco.
"It was a year of difficult choices, whose early results -
significant but still fragile - must be resolutely defended,"
added Visco.
The international community has recognized the reforms
being driven by the government of Premier Matteo Renzi, and that
means faster and expanded efforts are now needed.
"In order to not disappoint the expectations of change, it
is necessary to broaden the spectrum and speed up," he said.
Renzi's government has pushed through controversial labour
markets reforms, changes to electoral law, and is shepherding
through parliament highly charged changes to the country's
education system, which Visco said had fallen behind when
compared with its European peers.
The governor also warned that the benefits of structural
reforms "will not be immediate" and reminded Italians that in
the long run, these changes will be good for economic growth.
Visco's support will be appreciated by Renzi, who has
fought not only opposition parties but numerous critics within
his own Democratic Party (PD) to see his reforms become law.
The governor also called on the country's industrial sector
to boost its investments in innovation, which he said "is less
intense than in other European countries".
Meanwhile, the Greek debt crisis has so far had "limited
impact on sovereign risk premiums" in other eurozone countries,
said Visco.
However he warned that the broader economic problems in
Greece were "fueling serious tensions that are potentially
destabilizing" for eurozone members, including Italy.
Still, the country's credit market has benefited from the
European Central Bank's quantitative easing program, although
credit conditions in Italy remain "uneven", Visco said.
"Italian banks' ample recourse to the targeted longer-term
refinancing operations and the start of government bond
purchases by the Eurosystem have permitted a significant
reduction in the cost of bank funding," said Visco.
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