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MNI (London)
--Election Run-Up Sees Risk Of Italy Being 'Left Behind' In EMU Debate
--Leaving Reform Spotlight To France, Germany Could Be Harmful To Italy
By Silvia Marchetti
     ROME (MNI) - If Italy wants to remain a key player on the European stage,
it cannot afford to be left behind in the ongoing debate over eurozone reform,
especially in the run-up to the Mar 4 election, a Bank of Italy source told MNI
in exclusive comments.
     "The creation of a political union is a key objective, yet Italy has been
trailing behind Germany and France in terms of constructive proposals. The issue
of European reforms has been lacking from the current election campaign and this
weakens Italy's role," the central bank source said.
     Italy heads towards elections in just 9 days and the parties have largely
failed to advance significant proposals on how one of Europe's founding members,
and the European Unions third-largest economy, can contribute to the EU's
restyle and further advance the integration process.
     The risk of being absent from the debate is that if Italy shies away from
the EU spotlight, argued the source, allowing other leading European peers --
primarily France and Germany -- to define future reform frameworks, any outcomes
will be more favourable to them than to Italy.
     Recently, Bank of Italy governor Ignazio Visco said Italy must "make an
authoritative contribution to the current European debate", stressing that the
strength of its position is strictly linked to the country's "steadfast and
credible commitment" to boosting growth, pursuing reforms and curbing public
     The BOI source argued that much will depend on whether Italy will be
looking "forward" or "turning back" following the election.
     "We need to wait and see what happens after the March 4 elections:
up-to-date, the Italian economic outlook is positive and we are optimistic,
therefore it is crucial to keep going forward and not to waste such a window of
opportunity," warned the official.
     Italy's only 'enemy' at present was turning back the clock, undoing
progress achieved so far and halting growth, he said.
     Given that neither the eventual end of the European Central Bank's asset
purchase program, nor a potential rate hike should have negative repercussions
on the Italian economy, growth consolidation in the country solely depended on
how credible and effective fiscal targets were met, argued the source.
     "Banks are becoming more solid thanks to a significant reduction of bad
loans and even here inflation levels are slightly increasing. The picture is
rosy, potential risky factors could be endogenous, not external. Italy will be
in trouble only if it inverts the current positive growth trend," warned the
     "Markets might be looking with concern to the normalisation of monetary
policy and what impact this might have on Italy's recovery, yet the real issue
at stake is whether the country will be able, after the elections, to
consolidate its pro-reform agenda and meet fiscal commitments".
     According to the source, "going forward" along this path is paramount, even
more than putting an ineffective government in place right after the vote just
to fill the power void.
     The official brushed away concerns of a political "limbo" scenario
occurring in Italy, pointing to Belgium Italy and the Netherlands where
governing continued despite post-election political deadlock.
     If Italy does see deadlock after the election, the source said, "why should
this be seen as catastrophic for us when it has not been so for other
     "The real issue at stake is simply to avoid going backwards and undoing
what has been so hardly achieved in terms of growth and fiscal adjustment," he
--MNI London Bureau; tel: +44 203-586-2225; email:
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MNI London Bureau | +44 203-865-3812 |