IMF praises reforms in Italy as a model for Europe

IMF praises reforms in Italy as a model for Europe

The International Monetary Fund on Wednesday hailed radical reforms enacted in debt-burdened Italy by Prime Minister Mario Monti, who urged “courageous and ambitious” European efforts to boost growth.

“The progress is really a model when considering progress across Europe,” IMF director for Europe Reza Moghadam told reporters in Rome after an annual assessment and in reference to Monti’s crash programme in the last six months.

“Italy is on the right track and Italy has made remarkable progress in the last six months,” he said, adding that Italy was in “a very difficult and dangerous situation” when Monti took power amid a wave of market panic.

“But the job is not yet done,” the IMF official said. “There has to be more effort to revive growth,” he added, emphasising the need for more structural reforms, more pro-growth fiscal consolidation and more support from the banks.

Full implementation of structural reforms already announced would push Italy’s primary surplus to the highest level in the eurozone by next year and output could rise by up to six percentage points in the medium term, he said.

A former top European commissioner and economics professor, Monti was put in place at the head of a technocratic government with the task of saving Italy from bankruptcy and pushing through long-delayed reforms and painful austerity.

His mandate is up when Italy holds a general election as expected next year.

Monti has enjoyed high ratings compared to his scandal-tainted predecessor Silvio Berlusconi but his popularity has decreased as measures including an increase in the pension age and a new property tax have started to hit home.

Italy’s economy entered recession last year, contracting by 0.2 percent in the third quarter and 0.7 percent in the fourth. Initial estimates show the recession has deepened with a 0.8-percent shrinkage in the first quarter.

Monti implemented a draconian austerity programme shortly after taking office and has since proposed a number of deeper structural reforms, including cuts in red tape and moves to reduce protectionism in the economy.

Moghadam urged Italy to move “expeditiously” on a labour market reform plan that has sparked outrage from trade union leaders, saying this would increase jobs with the unemployment rate at a record high of 9.8 percent.

Monti agreed on Wednesday that “much remains to be done to deal with the delays which have built up for years, and with the structural weaknesses.

“Now is not the time to drop our guard,” he warned.

As European leaders discuss the balance between austerity and growth, he added: “Italy is not asking for less discipline on public finances but for more attention to growth with courageous and ambitious initiatives.

“The next few weeks will be decisive for our country and for the European Union,” he added, as doubts grow over Greece’s ability to meet its commitments.

Following a call with US President Barack Obama on Tuesday in which both leaders stressed growth and jobs, Monti said: “US concern on the eurozone is considerable and has been increased by the worsening of the Greek situation.”