Bank of Italy Governor Mario Draghi has just delivered his last annual report on the country’s finances before he is expected to take over as head of the European Central Bank.
Draghi urged the Rome government to cut spending and taxes and go for growth: “To quickly get the country out of crisis we must first balance the budget, which is crucial to increasing stability and boosting economic growth. To do this we must quickly reorganise public spending, reduce the taxes that weigh heavily on workers’ salaries and on entrepreneurs’ investments.”
Italy’s growth is weak compared with its larger euro zone peers – Germany and France – the economy is expected to expand by just 1.1 percent this year.
The deficit is only 4.5 percent of GDP, but a debt mountain of 120 percent of GDP limits what the government can do.
Italy has one of Europe’s most sluggish economies and more than a quarter of its young people do not have a job.
Rome recently brought forward plans to slash the budget deficit by 40 billion euros after the credit ratings agency Standard and Poor’s cut its outlook for Italy’s A+ rating to “negative” from “stable”.