Renzi vows to respect EU rules as Moody's sees GDP dip

Italy won't be dictated to on reforms, Renzi tells the EU

(ANSA) - Rome, August 11 - Premier Matteo Renzi said Monday that Italy will not break the European Union's 3%-deficit-to-GDP limit even though his government's budget calculations have been hit by an economic slide back into recession. "I have absolutely no intention of breaking the 3% ceiling," Renzi said in an interview published Monday in the Financial Times. "We hope to have better [growth] figures in the second half and as a result will be at 2.9% [of GDP]. We will not break the 3% rule. It is…a matter of Italy's credibility and reputation, even if others do break it".

The premier went on to say that Italy is well aware it must undertake structural economic reforms, but that Rome will not have them imposed by the European Central Bank (ECB) or anyone else. His comments came after ECB President Mario Draghi said last week that uncertainly over reforms in Italy hampered foreign investment and was a big factor in the economy's poor performance.

Draghi's comments came after national statistics agency Istat announced Wednesday that the country has slipped into its third recession in five years as GDP dropped 0.2% in the second quarter after shrinking 0.1% in the first three months of the year. This means that the government's forecast of 0.8% growth this year - the basis for its budget calculations - is set to be off the mark. "I agree with Draghi when he says that Italy needs to implement reforms, but I will decide how we are going to go about them. Not the troika, not the ECB, not the European Commission," Renzi told the Financial Times. "I will undertake the reforms myself because Italy does not need anyone else explaining what to do". The troika is a committee made up of EC, the ECB and the International Monetary Fund that organises bailouts. Later on Monday, the EC replied through a spokesperson that while it has given a series of recommendations on reforms that Italy has committed to, "their implementation is a matter that regards the (member) State".

Also on Monday, Moody's ratings agency said it expects Italy's gross domestic product to drop by 0.1% in 2014, revising downward its previous forecast of 0.5% growth. The agency said Italy would not hit its target deficit-to-GDP ratio of 2.7% this year after the country returned to recession, adding that there is "significant risk" that the deficit will get worse.