Monday, September 5, 2011

ECB warns Italy over austerity plan

Italian Prime minister Silvio Berlusconi (file photo)

Source: Press TV

The European Central Bank (ECB) has urged Italy to promptly implement austerity measures adopted earlier, amid worries over the country's credit worthiness.

"The ECB and euro system as a whole consider the measures announced by the government…extremely important in order to rapidly diminish the public deficit of Italy and improve the flexibility of the Italian economy," Reuters quoted ECB President Jean Claude Trichet as saying.

"It is essential that the targets announced to cut the deficit will be fully confirmed and implemented. This is absolutely decisive to consolidate and reinforce the quality and the credibility of the Italian strategy and its creditworthiness," he added.

Despite Prime Minister Silvio Berlusconi's austerity plan unveiled few weeks ago, the Italian government has failed to adopt the measures, believing that key measures such as a pension overhaul and a wealth tax should be scrapped.

The European Central Bank has so far spent EUR 41.6 billion on buying the Italian and Spanish bonds in an attempt to stop the downward pressure on their price.

Italy's Foreign Minister Franco Frattini said his government would urge the ECB to continue buying bonds for the country.

Italy's budget deficit currently stands at 3.8 percent of the country's GDP. The Italian government introduced a EUR 48-billion austerity package in July to balance its budget.

Earlier, Berlusconi promised to fast forward the plan and get the budget into balance by 2013.

So far, Greece, Ireland and Portugal have received bailout packages from the European Union. There are growing fears that Italy may be next in line to eclipse the previous bailouts and further undermine the Euro.

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