IMF urges spending cuts in Italy

13 July 2011 Last updated at 14:23 GMT Italian shares had a volatile day of trading on Tuesday The International Monetary Fund (IMF) has asked Italy to ensure "decisive implementation" of spending cuts to reduce the country's debt.

Its comments come as concerns continue that Italy may be the next country to be affected by the debt crisis in the eurozone.

The Italian government is now moving ahead with plans for an austerity budget.

The IMF said Rome may be being too optimistic about economic growth.

"[IMF] directors stressed that decisive implementation of the package is key and a number of them felt that more front-loaded spending measures would have a positive effect on market sentiments," said the IMF report.

It added that Italy's plans on tax reform lacked detail, and that the Italian government had to do more to boost the economy.

"Only sustained growth will reduce the burden of public debt." it said.

The IMF predicts that the Italian economy will grow by 1% this year, down from 1.3% in 2010.

Responding to the IMF report, Italy's Finance Minister Giulio Tremonti said: "We have to do more and we will do more in the coming hours."

Deficit target

Concern about Italy's finances saw its main share index, the FTSE MIB, fall as much as 4% at one point on Tuesday, before recovering to rise 1.2%. The index was up 0.6% in Wednesday trading.

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If these kind of [yield] levels persist, the burden for public finances would be severe”

End Quote Ignazio Visco Bank of Italy deputy director general Mr Tremonti is proposing 48bn euros ($67bn; ?42bn) in budget cuts over three years, and aims to cut the deficit to zero by 2014 from this year's 3.9% of gross domestic product.

He left a meeting of European Union finance ministers in Brussels early on Tuesday so he could continue to work on the austerity plans.

In a sign that investors are worried about Italy's financial situation, the yield on Italian 10-year bonds on Tuesday increased to 5.8%, before falling back to 5.6% on Wednesday.

Analysts say the yield remains close to levels at which the Italian government will have problems servicing its debts, which are currently more than 120% of the country's annual economic output.

The Italian central bank has confirmed this is the case.

"If these kind of [yield] levels persist, the burden for public finances would be severe," Ignazio Visco, the Bank of Italy's deputy director general, told a parliamentary hearing.

As concerns about the debt crisis in the eurozone continue, the Irish Republic had its debt-rating cut to junk status by ratings agency Moody's on Tuesday.

Moody's said there was a "growing possibility" that the country would need a second bail-out from the European Union and the IMF.

The credit rating agency's move was criticised by the European Commission.

A spokeswoman for Commission President Jose Manuel Barroso described it as "incomprehensible", adding that the timing was "questionable" because it came before the Commission published its latest review of Ireland's finances.

The Irish Republic is one of three eurozone countries that have so far needed such financial support, the other two being Greece and Portugal.

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Nuclear power referendum in Italy

12 June 2011 Last updated at 10:20 GMT By Duncan Kennedy BBC News, Rome Greenpeace says the technology is as dangerous as in Japan Italians have begun voting in four referendums, the most important of which is whether people want Italy to resume nuclear power production.

Anti-nuclear campaigners say the Fukushima disaster in Japan has helped sway public opinion against nuclear.

The referendums are also being seen as a test of the popularity of Prime Minister Silvio Berlusconi.

Italy's last nuclear programme was abandoned in 1987 following the Chernobyl disaster.

The government says a nuclear industry is vital to supply about 20% of electricity needs by 2020.

But the disaster at the Fukushima plant, which was crippled by the tsunami and earthquake that hit northern Japan in March, has changed the debate entirely.

Now Salvatore Barbera, from the campaign group Greenpeace, says people have seen the dangers and will reject nuclear energy in the referendum

"This is an old technology, it's dangerous as we saw in Fukushima," he said.

"It's dangerous when it's operating, it's dangerous when you have nuclear waste, no-one in the world knows how to deal with it, and now it's also expensive."

'Environmentally friendly'

If Italy does follow Germany and rejects nuclear power, that will be particularly disappointing to many in industry who believe alternative sources of electricity are not reliable.

Silvio Rossignoli from the aerospace company Sekur says only nuclear can guarantee supplies.

"We want to have nuclear because it's environmentally friendly and it's much cleaner than all the coal and gas," he said.

"It's not depending on importing from other countries, where you never know what happens."

Italians are also being asked to vote on water privatisation issues and whether government ministers can be exempted from court cases.

That is especially important to Mr Berlusconi, who is currently involved with four trials.

There is a lot at stake in this referendum, with the results due on Monday.

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