The Italian economy will run a balanced budget in 2013 before returning to growth the following year, the country’s outgoing finance minister has told the European Parliament.
Speaking with MEPs on the Parliament’s Economic committee on Monday (21 January), Finance Minister Vittorio Grilli said that “we expect to have a current account surplus by 2014”.
Grilli added that the Italian economy would grow by over 1 percent in 2014 after two consecutive years of recession, but described this projection as “not really adequate” adding that “the country needs to enact a series of structural reforms.”
However, he said that once the structural deficit had been eliminated there was “no reason to go any further with austerity.”
Though modest, Grilli’s economic projections are more optimistic than those of the Bank of Italy, which expects the country’s economy to pull out of recession in the second half of 2013 and expand by a meagre 0.7 percent in 2014.
Grilli told deputies that the government had sought to shift its tax burden away from labour and consumption to property, alongside greater powers for local and national tax authorities to crack down on tax evasion. Last year a Bank of Italy study asserted that 27 percent of Italian GDP had eluded taxation.
For his part, German liberal MEP Wolf Klinz, chairing the meeting, said that the best demonstration that Italy was cracking down on tax avoidance would be by jailing Berlusconi, who was convicted of multi-million euro tax fraud in October last year.
Although Grilli, an economist turned minister, admitted that the severity of the country’s austerity policies had hurt its economy, he insisted that, with financial markets jittery about Italy’s solvency, the government had had no alternative to austerity.
“There is no doubt that major fiscal adjustments are not conducive to growth in the short-term. But if you are in the midst of a confidence crisis then the choice is simply not there,” he said.
Bond yields on Italian ten year papers have fallen to around 4.2 percent, their lowest level since the start of the financial crisis, and well below the 6.45 percent level in November 2011 when former Prime Minister Silvio Berlusconi was ousted from his forth term as leader.
The technocratic government of ex-EU commissioner Mario Monti is serving out its last weeks in office with parliamentary elections to take place in February. The unelected Monti tendered his government’s resignation after the 2013 budget was adopted in December.
Although there is mounting speculation that Monti, and potentially other ministers, will take senior posts after the poll on February 24 and 25, Grilli is among those to have indicated that he will not be part of the next government.