Padoan says economic crisis less severe, Italy still weak

Economy minister says recovery is coming gradually

(ANSA) - Rome, March 12 - The economic crisis in Italy is less severe but the recovery remains weak, Economy Minister Pier Carlo Padoan said Wednesday as his government unveiled a major program of tax cuts and social investments.

"We are in a phase of macroeconomics in which we are recovering, but we are still weak," he said. "The crisis is a bit less severe than in the past but it is not over yet," added Padoan, who was until recently chief economist of the Organisation for Economic Co-operation and Development (OECD).

He spoke after Premier Matteo Renzi announced plans to cut income taxes by 10 billion euros, invest 1.74 billion euros in social housing programs, spend 3.5 billion euros on schools, repay 68 billion euros in outstanding bills for government services by July, and various labour market reforms.

The expensive program appeared aimed at giving the struggling economy a domestic lift by putting more money into consumers' pockets to spend. Renzi said he was confident the European Union would appreciate his efforts to boost growth, and both he and Padoan maintained the plan will not threaten the EU's budget deficit limits. Italy has said it will remain below the 3% maximum deficit-to-GDP limit mandated by the EU, but faces challenges in maintaining that as weak economic growth appears likely to stay in the months ahead.

On Tuesday, the OECD warned that although economic growth in the first quarter will be relatively positive at 0.7%, the second quarter of 2014 still looks weak, likely showing just 0.1% expansion between April and June.

Mixed results are nothing new in the lackluster Italian economy which has struggled to recover from its worst recession since the Second World War. Still, it received a bit of good news Tuesday as official data from the national statistical agency Istat confirmed that Italy's economy grew slightly - about 0.1% - in the final quarter of last year compared with the previous quarter, proving the harsh two-year recession is over. Istat also revised upwards its official estimate for GDP for 2013, reporting that it fell by 1.8% rather than the 1.9% it had previously estimated.

Both figures suggest that the country is on a painfully slow path to recovery.