ECB head says Italy must pursue prudent budget policies

10th February 2011, Comments 0 comments

Italy must pursue prudent budget policies, collect more taxes and become more productive, European Central Bank president Jean-Claude Trichet says.

"It is vital to continue to pursue a very prudent fiscal policy," Trichet told the Italian magazine Espresso in an interview to appear Friday.

"Major efforts should be made to fully achieve public sector spending cuts and to increase efficiency in tax collection in order to implement a credible and ambitious consolidation strategy," he added in remarks released in advance by the ECB.

Italian austerity measures in the 2011 budget "go in the right direction and Italy should seize any opportunity presented by better budgetary and economic conditions to accelerate deficit and debt reduction," Trichet said.

In July, Rome adopted an austerity plan worth 25 billion euros ($34.1 billion) that should help cut the public deficit to 2.7 percent of output in 2012.

In 2009, the Italian public deficit stood at 5.3 percent of gross domestic product (GDP), well above the European Union limit of 3.0 percent but not as bad as some other weaker eurozone members such as Ireland, Portugal and Spain.

The Italian national debt, however, currently stands around 120 percent of GDP, twice the EU limit.

The country "possesses remarkable human resources and an equally exceptional entrepreneurial spirit (but) ... the very low level of productivity growth is to be corrected without delay," the ECB president advised.

He declined to comment on who would head the central bank when he steps down in October, noting it was a decision made by EU heads of state and government.

Asked about a suggestion by German Chancellor Angela Merkel to raise the retirement age to 67 across Europe, Trichet said that because life expectancy was longer, "there is a need to extend the retirement age itself, as is being done in practically all countries.

"A coordination of such decisions within the framework of the enhanced economic union would be a good thing in my view," he added in reference to talks now taking place on how to strengthen the 17-nation eurozone.

© 2011 AFP

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