EU opens in-depth review of Italy 'imbalances'

Barroso urges reforms as more Italians poor and excluded

13 November, 19:12

    European Commission President Josè Manuel Barroso European Commission President Josè Manuel Barroso

    (By Denis Greenan).

    (ANSAmed) - Rome - The European Commission (EC) said Wednesday that it is opening an in-depth review of recession-hit Italy's macroeconomic imbalances as more and more people are swelling the ranks of the 'new poor' and being excluded from the economy.

    Italy, France and Hungary were deemed in need of further analysis in the EC's Alert Mechanism Report (AMR), which was released Wednesday in relation to the EU executive's Macroeconomic Imbalance Procedure (MIP).

    They were among a group of European Union countries identified by the EC as experiencing excessive imbalances.

    "France, Italy and Hungary were found to be experiencing imbalances in the previous round of the MIP and the Commission indicated the necessity of adopting decisive policy actions," read the AMR.

    "The upcoming in-depth review will assess the persistence of imbalances".

    The EC said it will make policy recommendations after the in-depth review.

    The imbalances the EC looks at include public debt levels, unemployment, labour costs, the rate of people at risk of poverty or social exclusion and the percentage who are living in households with very low work intensity.

    Italy has been placed under review due to its increasing poverty, the EC said. "Poverty and social exclusion have increased significantly in Italy'', the Commission wrote in its report, which is based on eleven indicators of external and internal imbalances. European Commission President Josè Manuel Barroso said Italy must "complete the (structural economic) reforms promised by the government".

    But he added that the political instability within Premier Enrico Letta's grand-coalition government "has not put the progress made at risk".

    Barroso said a recovery in the Italian economy is fragile but the first signs can be seen.

    Still, he added, the government cannot allow political uncertainty to pull its focus away from the importance of maintaining longer-term economic reforms.

    "In Italy we are beginning to glimpse the first signs of recovery, but it is a very fragile recovery," said Barroso, who was speaking on the issue of economic imbalances in Europe.

    "You should not put at risk the path of reforms," he added.

    His remarks came on the same day that Letta said that he was confident Italy was about to pull out of its longest recession in over two decades.

    The government had said it was hopeful the recession would end in the second half of this year, although national statistics agency Istat recently reported that Italy again posted negative growth in the third quarter.

    "The recovery is within reach in 2014," Letta said. "There are signals that we can reverse the trend," he added.

    "Even though it cannot be seen in the figures yet, I'm confident we can get going again".

    Italy has been in recession since the third quarter of 2011.

    Italy's efforts to emerge from its longest recession in 20 years are at risk from the instability affecting its government that sees traditional foes, Letta's Democratic Party (PD), in an uneasy alliance with three-time premier and media magnate Silvio Berlusconi's People of Freedom (PdL) party.

    Berlusconi has repeatedly threatened to sink the government because of his upcoming ejection from the Senate on a tax-fraud conviction but pro-government elements in the PdL, which is on the verge of splitting, may keep it going.

    Letta is hoping to enact key structural reforms to rev up Italy's sclerotic economy before 2015 while keeping to EU-mandated fiscal discipline.

    The 2014 budget, which is being changed daily, contains modest growth-boosting measures along with spending cuts that will keep the deficit-to-GDP limit within the mandatory 3% limit, Economy Minister Fabrizio Saccomanni says.

    Barroso also announced the Commission is undertaking an in-depth review of Germany's high trade surplus. The EU wants to see whether Berlin ''can do more to help balance the European economy'', he said.

    (ANSAmed).

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