mercoledì 24 settembre 2014

Draghi warns of fragility, as Squinzi urges investment

Confindustria says govt must 'create conditions' for growth

(ANSA) - Rome, September 24 - There is no risk of recession across the eurozone although it remains "fragile", European Central Bank President Mario Draghi said Wednesday even as an Italian business leader urged governments to do more to encourage investment and growth. Draghi said that he sees no risk of recession or deflation across the eurozone economies, but slow growth means that inflation will remain muted for an extended period. "The eurozone is not in recession but recovery is modest, weak and fragile," he said in an interview with Europe 1 radio.

Italy, the eurozone's third-largest economy, is in recession and in August reported deflation as the consumer price index slipped into negative territory. And he repeated his call for structural reforms by government, saying that monetary policy can help to encourage economic growth by injecting cash - but that alone is not enough. Rigid bureaucracies, high taxes, and red tape that ties up businesses strangle growth and discourage the new investment essential for economic expansion, said Draghi. "We can guarantee all the credit possible, but if in some countries it takes a young entrepreneur months before obtaining permits and authorizations to open a new store, in the end he will not request credit," Draghi added.

Italian companies have shed an average 25% of business volumes since the global crisis began in 2007, and that has left some unable to consider taking on loans to expand, the head of one of Italy's largest employer groups said. "It is difficult to evaluate, but in general terms I think that Italian banks have asked for less (from the ECB) because our economy is depressed and internal consumption is not recovering," said Giorgio Squinzi, head of Confinustria representing Italy's largest industrial employers. Last week, the ECB released its first loans to commercial banks under a new program designed to encourage increased lending to business and consumers in the eurozone. But take-up was less than expected.

Squinzi also urged the government to do more to "create the conditions" that will encourage greater business investment, hiring and thus, economic expansion in Italy. "Firms need to invest in their business", he said on the sidelines of the Marmomacc business fair for the stone industry in Verona. "It is therefore necessary to create the conditions that create confidence for Italian (investors) and for foreign investors to come back, to have confidence in this country and to make investments," he said.

One bright note came earlier on Wednesday, when national statistical agency Istat announced that consumer confidence had edged up slightly this month compared with August. That is essential to economic recovery, said Squinzi. "(It's vital) to restore the confidence of consumers because that is crucial to regaining the confidence of investors, which is the most important thing". 

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