(16 May 2012)
An International Monetary Fund official says Italy has made "remarkable progress" toward improving its financial outlook in the last six months but added that work needs to be done on growth.
Reza Moghadam, director of the IMF's European department, on Wednesday praised Italy's reform course but in the wake of Moody's downgrading of Italian banks this week, he also stressed that Italian banks needed to reinforce their capital.
Moghadam paid tribute to Italy's technocrat caretaker government for their ability to halt the economic slide that was on course for a disaster of Hellenic proportions.
However, he also highlighted that structural reforms need to be made in order to continue to hold off the likelihood of further fiscal atrophy.
Moghadam urged the implementation of the labour reform bill, which are designed to increase a company's flexibility in the areas of both recruitment and dismissal. Unions have opposed the measures.
The new bill would allow companies that are suffering under economic hard times to lay off workers without the threat of becoming embroiled in a long-winded judicial process. Workers would instead be compensated.
The resounding anti-austerity votes in elections in France, Greece and Germany's most populous state have piled pressure on Italian Prime Minister Mario Monti.
He needs to placate an increasingly restive population while persuading markets that it's safe to lend to a nation whose public debt of nearly two (t) trillion euros (2.6 (t) trillion US dollars), the highest in Europe, amounts to a staggering 120 percent of GDP.
"We have proved with facts that we care about financial stability and not only with words," Monti said at the IMF conference in Rome on Wednesday.
Hailed as a saviour in November when he was named premier to tackle the financial crisis, Monti is under attack from all sides - variously described as a cold-hearted economist, a slave to the banks or a softie lacking the courage to push harder with reforms.
Adding to the urgency, Italy announced this week that it sank deeper into recession, its economy shrinking for the third straight quarter in its biggest contraction since 2009.
"I think we are entitled to push at a European level towards integration between stability and growth," Monti added, showing a clear desire to strike a balance between austerity and government spending.
While the disenfranchised have taken to the streets in other crisis-ridden European nations, the downturn has hit Italy's economy in a spotty way - a key reason why the nation has yet to see a mass protest movement.
At the same time, the crisis is showing no signs of easing.
Unemployment rose to 9.8 percent in March, the highest in 12 years.
Business failures have been rising for the last four years, and show no sign of slowing. In the first three months of the year, official data shows 3,000 businesses closed, up 4 percent from the same period last year.
The deepening woes are putting pressure on the parties supporting Monti in Parliament - all of which suffered setbacks in the recent elections.
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