(Updates with comments on growth and structural changes starting in the first paragraph.)
Oct. 12 (Bloomberg) -- Bank of Italy Governor Mario Draghi said the country must quickly implement austerity measures and boost economic growth to avert an “ungovernable” debt spiral.
“Action must be taken quickly,” Draghi said in a speech in Rome today. “If protracted, the high borrowing costs seen in the last three months could largely offset” the effects of the austerity moves approved last month, “with a further negative impact on the cost of debt, in a spiral that may end up being ungovernable.”
Draghi, who on Nov. 1 takes over from Jean-Claude Trichet as president of the European Central Bank, also said that Italy must take steps to boost economic expansion. Italian growth has lagged behind the euro-region average for the last decade, making it harder to reduce debt of about 120 percent of gross domestic product, the second-largest in Europe after Greece.
Italy’s government got final approval last month for 54 billion euros ($73 billion) in austerity measures that helped convince the ECB to start buying the nation’s bonds after its borrowing costs surged to record highs. It’s imperative that countries such as Italy meet their European fiscal commitments, Draghi said today.
While the austerity measures have put public finances on a more sustainable path, they’re “not enough,” Draghi added. He called for structural changes to boost economic growth, such as overhauling the civil justice system and education, improving competitiveness, liberalizing the labor and services markets, and opening up closed professions.
Italy needs “a strong growth impulse to drastically reduce public debt,” he said.
--Editors: Jeffrey Donovan, Andrew Davis
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