Move from austerity to growth necessary, says Italian premier
(ANSA)
- Rome, March 21 - As Italy continues getting its own fiscal house in
order, it will be able to help lead the rest of Europe away from an
obsession with austerity towards policies designed to boost growth,
Premier Matteo Renzi said Friday.
As
he left his maiden appearance at a European Union summit, Renzi -
leader of the centre-left Democratic Party (PD) who became premier
last month - sounded confident that he had won support from other EU
leaders for his domestic reforms.
Those,
he suggested, may also prove to be something of a model for the rest
of Europe, particularly as Italy prepares for its duty presidency of
the 28-member EU in the second half of this year. Indeed, "the
most important topic discussed" at the EU summit in Brussels
that closed Friday concerned "reforms and time lines for
reforms," said Renzi. "Italy can get there with a lot to do
and say, only if first we're able to put in place this gigantic work
on reforms".
Last
week, the fledgling premier unveiled a broad reform plan that
includes cuts to income taxes for low-income Italians by 10 billion
euros, slicing 2.4 billion euros from business levies, investing 1.74
billion euros in social housing programs, spending 3.5 billion euros
on schools, and repayment of 68 billion euros in outstanding bills
for government services by July. At the same time Renzi, 39, has
maintained that he will keep the books within the EU-mandated limit
of a 3% deficit-to-GDP level by financing his plans through cuts to
existing spending plans rather than running up bills.
Still,
he has suggested that such limits are outdated, courting concerns
from some senior EU officials who worried that Renzi was considering
breaching those limits. Renzi also warned that while Italy's deficit
for 2014 will remain under the 3% limit, it would not likely drop as
low as the 2.6% that was previously forecast. That initially
triggered concerns for European Commission President José Manuel
Barroso, who sounded less worried after meeting Renzi on Thursday.
"The
Italian premier has committed himself to a very ambitious programme
of reforms while at the same time saying he would respect the
commitments made at the European level," said Barroso. "I
think this is fundamental for confidence in Italy and the whole EU".
Italy
has been under considerable pressure from the European Commission,
which has complained that Italy's 2014 budget was insufficient to
correct the country's "excessive macroeconomic imbalances",
including high debt and low competitiveness.
The
EC has warned that it would be monitoring Italy's macroeconomic
imbalances and efforts by the eurozone's third-largest economy to
reform these, as it keeps a watchful eye on Italy's huge debt to GDP
ratio of about 133%. Meanwhile, Renzi has said that significant
labour market reforms in Italy are in the works and are essential to
cope with a jobless rate of almost 13% in Italy, including about
42.4% youth unemployment.
These reforms are not an option,
"this is not a debate over whether we can deal with it or not,"
added Renzi, who has suggested it is time to shift focus away from
concerns about reducing debt to instead consider policies aimed at
encouraging growth and recovery. At the same time, Spending Review
Commissioner Carlo Cottarelli, a former International Monetary Fund
(IMF) official, has been devising a list of potential spending
programs where as much as five billion euros could be in the last
eight months of 2014 for lower-priority areas, to free money for
higher priorities, Renzi has said.
Renzi
admitted that will demand hard choices in terms to where to cut, for
which he will take responsibility. But like a family budget, "if
there is not enough money, it's Mom and Dad who decide what to cut
and what is not (cut)," he said.
Before
the EU summit, Renzi also took the time to run his plans by the
German government, often seen as one of the strictest EU members in
terms of enforcing debt and deficit limits. On Monday, he won a
powerful vote of confidence from German Chancellor Angela Merkel, who
praised Renzi's "courage" in making significant structural
changes in Italy's economy.
During
the first bilateral meeting between the two Merkel, the head of
Europe's largest economy, said she looked at "all aspects"
of Italy's reforms, adding she was impressed and wished Renzi "a
lot of luck". "It is clear to me that Italy is paying
attention to (fiscal) stability as well as to growth and employment,"
she added.
