‘Eurozone govts worry over Italy’s low growth’

25 April, 2019 12:00 AM printer

LISBON: The euro zone is worried about the heavily indebted Italian economy's weak growth and needs Rome to implement its budget plans "with credibility", the head of the currency bloc's group of finance ministers said.

Speaking in an interview with Reuters, Mario Centeno, who leads the Eurogroup of 19 ministers, said it was essential that the euro zone's third-largest economy returned to growth while meeting its budget targets, report agencies.

"It is a challenge we should never be complacent about and that is why there is worry. That is where the big challenge of the Italian economy is - to grow," he said.

Mr Centeno was speaking late on Monday, on the eve of a Rome cabinet meeting to discuss stimulus measures. That meeting on Tuesday evening is expected to sign off on tax breaks, investment incentives and debt relief for local government.

Italy last year unveiled a big-spending budget for 2019, rattling the euro and other financial markets, but it has so far had little impact on growth. The economy slipped into technical recession at the end of 2018 and is now barely expanding.

The government, a fractious two-party coalition, downgraded its 2019 growth outlook this month to just 0.2 per cent, from a December forecast of 1 per cent. Its budget deficit is now set to climb to 2.4 per cent of gross domestic product, above a goal of 2.04 per cent previously agreed with the European Commission.

"Italy is facing some difficulties in this economic cycle," Mr Centeno said.

"The message is relatively simple: the government has a demanding budget to execute and it needs to be executed with credibility, and we need to gather all our efforts to reverse Italy's growth tendency." Italy's mix of high debt and low growth has shaken investors who have pushed relative yields on sovereign debt to high levels not only against German government bonds, considered the euro zone's safest, but also above Spanish and Portuguese paper.