Europe is facing "a very
worrying combination" of negative economic factors, including
low growth and investment, low inflation, high debt and high
unemployment, Economy Minister Pier Carlo Padoan said Monday.
His comments to the Lower House also reflected the very
weak conditions in Italy's economy, which is in its third
recession since 2008.
Analysts have underestimated that full extent of the
economic crisis that has shaken much of Europe and may not
understand all of the factors at play, added Padoan, speaking on
the European Union's economy.
"Growth estimates have been too optimistic...growth has
been postponed, and some of the causes are still misunderstood,"
Padoan said.
"The problems we face go deeper than a mere cyclical
adjustment," he added.
Concerns about problems of low productivity in Italy and
elsewhere, along with sluggish growth, have led policy leaders
including European Central Bank President Mario Draghi to call
for significant structural reforms by governments in the
eurozone.
Such reforms are the "real challenge" for Italy and Europe,
said Padoan.
He spoke as the government of Premier Matteo Renzi
continued to battle critics in his own party as well as
organized labour over reforms to Italy's labour market - the
sort of structural reform policy makers often refer to.
It would be helpful if the EU gave countries more room for
expansive fiscal policies by increasing flexibility in its
budget rules, said Padoan.
The focus is shifting, he said, away from austerity to a
"policy mix that makes the best possible use of the tools that
we have available (to stimulate growth)".
That reflects a frequent call by Renzi for the EU to allow
certain kinds of government spending - on infrastructure, for
example - to be excluded from budget rules that require deficits
of no more than three per cent of gross domestic product (GDP).
As rules now stand, there is too much pressure for
adjustments on European countries in deficit and not enough on
countries that are in surplus, Padoan said, referring to
Germany, which analysts have said often runs budget and trade
surpluses at the expense of other European nations.
"There should be a qualitative not quantitative approach to
budget policies," Padoan told the Lower House.
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