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Central bank chief blasts union, business 'rigidity'

Economic stagnation serious problem, warns Visco

28 March, 19:40
Central bank chief blasts union, business 'rigidity' (By Sandra Cordon) (ANSA) - Rome, March 28 - Rigidity in Italian business, labour and the bureaucracy are all serious problems weighing down the national economy, Bank of Italy Governor Ignazio Visco warned Friday.

That's creating a significant problem for growth, leading to economic stagnation, Visco added in comments at a conference at Rome's LUISS university, marking the 100th anniversary of the birth of economist Guido Carli.

Visco noted that Carli, who also served as governor of the central bank from 1960 to 1975, raised similar concerns about bureaucratic barriers to growth, at a time when Italy was struggling with the price inflation that shook much of the world during the 1970s. "Rigidity in legislation, bureaucracy, corporation, workers, unions are always the principal hindrance to development in our country," said Visco. The consequences today "are different from those that were manifested in the 1970s; at that time it was inflation, today, it is stagnation".

Raffaele Bonanni, secretary-general of the CISL union, dismissed Visco's words as "nonsense" while Susanna Camusso, the head of the powerful CGIL trade union, said that it seemed Visco was "repeating the same recipes that have already failed".

Meanwhile, Visco urged continued structural reforms in the Italy economy, adding that early signs of economic recovery are encouraging but need to be supported.

"Only by tackling the structural problems that had put the brakes on the Italian economy even before the current crisis...will it be possible to return on the path of a strong and lasting recovery," he said.

Italy's gross domestic product fell by an average of 1.9% last year, but began to recover in the third quarter and agencies including the IMF forecast growth of 0.6% this year, rising to 1.1% in 2015. GDP fell 2.4% in 2012, according to revised data from national statistical agency Istat.

Premier Matteo Renzi has been announcing a wide range of economic and labour market reforms, including public spending cuts to free up cash to finance income tax cuts for low income earners, spending on social programs, and a multibillion-euro repayment of bills owed by government to business.

Renzi has also pledged reforms to Italy's electoral system and begun the legislative process of eliminating an entire layer of government at the provincial level.

As well, on Friday he made good on a pledge to cap the salaries of top public officials, although Renzi stopped short of including heads of such State-controlled companies as Eni, Enel, Finmeccanica, loan trust Cassa Depositi e Prestiti (CDP), Poste Italiane and State railway Ferrovie dello Stato.

Indeed, the time is ripe to change the European policy agenda in terms of supporting growth rather than focusing on spending constraints, Economy Minister Pier Carlo Padoan told the conference.

"I think it's time to say that we need to change the direction of the economic policy agenda in Europe," Padoan said.

"Enormous efforts" were made, following the sovereign-debt crisis that shook the continent, to control spending, reduce debt and restore investor confidence in Europe, helping to lower interest rates, he said.

Those achievements must not be squandered, he noted.

But the time has come to focus on measures to encourage sustainable economic growth over the next two decades, said Padoan who was, until recently, chief economist with the Paris-based Organization for Economic Cooperation and Development (OECD).

"We must begin to think about what it means to generate growth," he said.

Almost all countries in Europe will show some economic growth this year, early steps towards moving beyond recession and damage that has caused, said Padoan.

But leaders should aspire to more than simply eking out low levels of growth.

"I'd like to think that in the coming months there would be a structural change (towards) positive growth and employment," said Padoan.

The difference between those scenarios comes down to political choices that Europe must face in a serious, "non-ideological" manner, he said.