Nov. 25 (Bloomberg) -- Italy should accelerate budget cutting and “adopt bold measures to relaunch growth,” European Union Economic and Monetary Affairs Commissioner Olli Rehn said in Rome today.
EU experts monitoring Italy’s implementation of austerity measures will present their first assessment report to the euro finance chiefs on Nov. 29, Rehn said today in an address to Italy’s parliamentary budget and European committees.
Italy’s challenges are “formidable” and largely derive from “well-known and long-standing structural weaknesses,” Rehn said, calling for the country to cut its debt, revamp economic growth and put into operation the measures approved in the last few months.
Italy had to pay almost 7 percent to sell six-month bills at an auction today, fanning investor concern that the world’s fourth-biggest borrower may struggle to finance its debt. The sale came as Italy’s new prime minister, Mario Monti, met his Cabinet to advance additional measures that aim to cut a debt of 1.9 trillion euros and boost the economy in a country where growth has lagged the euro-area average for more than a decade.
Rehn said that reforms in Europe would prove difficult because of weak economic growth, adding that no improvements in the labor market are expected next year. “The steady, although modest, economic recovery experienced since mid-2009 has now stalled,” Rehn said, adding that risks on the current economic scenario are “on the downside.”
The recent developments “in euro-area sovereign bond markets suggest that contagion is spreading from peripheral countries to the so-called core countries,” Rehn said.
Rehn also said he expected the European Central Bank to continue to play “a substantial role” in the future.
Rehn added that joint euro-area bonds are a tool that by themselves won’t solve the debt crisis and that any type of common bond “would have to go hand in hand with a substantially reinforced fiscal surveillance and policy coordination.”
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