Padoan Says Italy To Cut Debt, ‘Not Satisfied’ With Economy

Italian Finance Minister Padoan on Debt, Banking
  • Italy ‘doing very poorly on inflation,’ finance minister says
  • Budget law to include measures to revive growth, Padoan says

Italy will maintain a target of debt-load reduction after the economy stalled in the second quarter and as the country tries to avoid deflation, its finance chief said.

The “debt will start to decline with respect to GDP and we continue to maintain this target,” Finance Minister Pier Carlo Padoan said on Friday in a Bloomberg TV interview with Flavia Rotondi in Cernobbio, Italy. “We are doing modestly well in growth, but we are doing very poorly on inflation -- this inevitably impacts on the speed at which debt will decline.”

Gross domestic product in the euro region’s third-biggest economy was unchanged in the three months through June, national statistics office Istat said in its final GDP report Friday. In August, consumer prices were down 0.1 percent from a year earlier, according to a domestic gauge, as the country seeks to avoid deflation.

Padoan also said that “there is no change in trajectory” of the deficit-to-GDP reduction this year and next, though Italy will ask the European Union for all the “available flexibility” in 2017 budget targets.

’Not Falling’

“Italy is not falling into recession, but growth will remain moderate,” the former chief economist at the country’s Treasury Department, Lorenzo Codogno, said in a note to investors after the GDP report. “I would expect growth to gradually resume in the second half, leading to a meager 0.8 percent outcome for the whole year.”

Last month, Padoan said that the government’s official forecast of a 1.2-percent GDP annual growth this year “would be put into question” by the U.K.’s voters decision to leave the European Union, the international terror threat and the migrant influx. Padoan will issue an updated projection this month ahead of the government’s budget law.

In the interview at the Ambrosetti Forum, Padoan added he expects to work “very well” with the EU Commission on the budget law.

“Of course we are not satisfied, growth must be higher than that and it will be higher,” Padoan also said, when asked to comment on Italy’s economic performance. “The next budget law on which we are currently working on will boost the use of limited resources available to support growth and investments.”

Italy’s economy will fare this year “better than in 2015,” when GDP expanded 0.8 percent, Prime Minister Matteo Renzi said, speaking after Padoan before an audience of entrepreneurs and investors at the Ambrosetti Forum.

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