Excessive imbalances in Italy, risk

(ANSA) - Brussels, February 27 - Italy still has "excessive" economic imbalances, the European Commission said in its Country Report on Italy Wednesday.
    In particular, "the high (public) debt and protracted scant productivity imply risks with a transnational significance, in a context of high levels of NPLs and unemployment," the report said.
    "The debt will not fall in the next few years, given that weak macro prospects and the current government budget plans, albeit less expansive than before, imply a deterioration in the primary surplus".
    The Commission said that "the 2019 budget includes measures that overturn elements of important reforms done previously, in particular on pensions, and does not include effective measures to boost the growth potential".
    It said "despite some progress in mending banks' balance sheets, reforms of bankruptcy law and active policies on the labour market, the impetus of reforms has been amply stalled in 2018".
    The Commission said that "higher rates with respect to the levels of the start of 2018 are affecting banks' funding costs and capital buffers, weighing on the supply of credit to the economy and GDP growth".
    It said "the stock of non-performing loans (NPLs) has continued to fall significantly, but keeping up the pace of reduction in NPLs will be challenging given the conditions of the market".
    Presenting the report, Vice President for the Euro Valdis Dombrovskis said "we remain concerned that debt is not falling because of the government's weak economic plans, and in general the impetus of reforms has stopped".
    He said "The Commission remains vigilant and will closely monitor the Italian situation" to make a Spring assessment based above all on "the level of ambition of the national reform programme".
    The Italian situation is "concerning" and the EC's message is "well-known and strong: it must improve its public finances, the efficiency of the public administration and the judicial system, and reinforce the financial system," Economic Affairs Commissioner Pierre Moscovici said.
    He said "the urgency is still more felt given the weakening of the Italian economy which, I remind you, is growing by 0.2%".
    The Commission will see if the government's new basic income for the poor and job seekers is "sustainable" for the public finances, Employment Commissioner Marianne Thyssen said.
    The EC will also gauge its impact on employment, given the weakness of employment policies, she said.
    The basic income is one of two flagship policies in the 2019 budget.
    The other is the 'quota 100' pension reform.
    Deputy Premier and Labour and Industry Minister Luigi Di Maio on Wednesday contradicted the EC's concerns that the 2019 budget is stifling growth.
    "I don't think that our measures are blocking growth," he said.
    He said government measures "serve to emerge from a state of crisis in which the European Union finds itself".
    Economy Minister Giovanni Tria suggested it was not the EC's remit to judge individual measures like the basic income and the quota 100 pension reform.
    Premier Giuseppe Conte said that the EU's country report on Italy "contains growth forecasts that underestimate the impact of the economic measures which we have launched and which will have effects in the months to come".
    Conte said on the EU's negative assessment of Italian budget moves that "the choices of economic policy may be various. We are convinced about our recipe and we will be proved right and we are convinced that we must avoid the mistake of recessive policies when the economic cycle is not favourable".
    Conte said on a growth decree announced Tuesday by Deputy Premier Di Maio that "we are focused on legal provisions, it is my subject, I'm also a jurist. But I'm fully aware that the technical-political-legal aspect is fundamental but the perspective must not be missed: the government has a fierce determination to work, it doesn't settle for adopting measures".