Italy not planning corrective budget after eu scolding
Italian government will cut spending to raise cash for tax cuts06 March, 18:22
In its report on Wednesday, the EC added that it would be monitoring Italy's macroeconomic imbalances and efforts by the eurozone's third-largest economy to reform these.
In response, Renzi and his finance minister, former OECD chief economist Pier Carlo Padoan, said they will implement numerous reforms to labour and income taxes while boosting job creation.
In fact, by cutting as much as five-billion euros annually from various spending programs, the government could raise enough to offset the cost of labour tax cuts, Padoan told finance newspaper Il Sole 24 Ore in an interview published Thursday.
As well, the government will "immediately" make use of European Union structural budget funds to finance job creation and other measures to boost growth, he added during an interview with ANSA. Renzi has also said he will introduce an extensive program of job creation measures, which he has been discussing for weeks, on Wednesday.
Renzi said Thursday that his government's priority is "jobs and growth, growth and jobs".
At least some funding for those measures can be tapped into through European Union funds, said Padoan.
"It is possible to start immediately to investment in a few targeted measures, in agreement with the EU, for employment and competitive measures," as part of a new program stretching through the year 2020, said Padoan.
He also pledged that Italy will maintain a debt-to-GDP level no higher than the 3% mandated by the EU and continue its program of repaying billions of euros in outstanding bills for services and goods provided by business to government.
Italy has begun to slowly come out of its worst recession since the Second World War, but GDP growth this year is forecast to average only about 0.6%.
European Central Bank President Mario Draghi said Thursday that he "welcomed" the EC statement, adding that a mix of measures to correct economic imbalances is necessary in Italy - and in other countries with similar problems. Those necessary measures includes reducing debt but also structural reforms to increase economic growth and job creation, he told a news conference.
"It would be a disaster," if Italy wasted "so much sacrifice and pain" of recent years when economic reforms were introduced, by now balking at the next steps, added Draghi.
One day earlier, European Economic and Monetary Affairs Commissioner Olli Rehn increased pressure on Rome to adopt urgent measures after the EC said Italy was under "specific monitoring" over its macroeconomic imbalances. "We invite the new government to address the imbalances that require urgent policies and to carry out reforms to strengthen growth and employment," Rehn said.
The review came only a week after the EC downgraded its outlook for Italy's economy, warning that growth in 2014 will likely average only 0.6% - less than previous estimates of 0.7%.
It also warned that when final figures for 2013 are settled, those results will likely also be weaker than previously thought.
As well, sovereign debt is forecast by the EC to rise to 133.7% of GDP this year, a factor in what Renzi has called a "swamp" of economic weakness and loss weighing down the country's balance sheet.
More evidence of the weakness in the Italian economy came Thursday when retailers association Confcommercio said that consumer spending fell in January by 1.6% compared with the same period last year.
The decline is "showing clearly all of the difficulties in the Italian economy after two years of recession," the group said.
Confcommercio said that January's consumer spending was also 0.3% lower than that recorded in December.
The only increases in spending were reported in communications-related devices and services while spending fell by 2.3% in hotels and restaurants meals and 2.2% for household-related goods.
Spending on clothing and footwear slid by 2.1%.