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--Italy Coalition Fiscal Stimulus Numbers Look 'Big': Praet
By David Thomas
BRUSSELS (MNI) - European Central Bank Chief Economist Peter Praet said
Thursday that the euro zone recovery is on track -- at least from a demand point
"The economy is doing good but there are clouds -- some say fog -- but I
see clouds, Praet said.
Speaking at a European Business Summit lunch, Praet said that the spike in
PMI business confidence indicators in Q4 last year had been "unsustainable" even
Temporary factors had been cited for the slowdown but there were genuine
supply constraints and bottlenecks.
"There is a significant slowdown but is to do with supply constraints. We
don't see a reason why there should be a slowdown on the demand side," he said.
From the demand side there was no reason to expect growth to stall, noting
wage growth of 2% across Euro Zone and a stronger 2.8% in Germany.
But the international scene could produce shocks to the Euro zone economy.
Praet said that the appreciation of the euro against the dollar might slow
growth - up until recently that rise was around 16% since Feb 2017 - after
recent easing this was about 11%.
Discussing Italy, while noting Italian coalition fiscal plans are not
completely definitive and available yet, the information so far is concerning,
"Figures we have seen raise a lot of concerns," he said.
Praet added that Italian fiscal capacity is clearly "limited " noting debt
well over 100% of GDP. The stimulus plan outlined so far, Praet said, looked
Praet said the challenge for the June EU summit would be to rebuild trust
between member states.
"The basic question here is trust. How can you gain trust so that you can
address issues with colleagues," Praet said.
"The challenge for summits is to rebuild that trust," he added
Praet cautioned that the Italian fiscal plans are still at the elaboration
--MNI London Bureau; tel: +44 203-586-2225; email: email@example.com