WASHINGTON (Reuters) - Highly indebted Italy must gradually consolidate public finances and boost productivity, the head of the International Monetary Fund’s European department Poul Thomsen said on Friday.
Itay has the second highest public debt in Europe at more than 130 percent of GDP, but its populist government is planning more social spending despite growth coming almost to a halt.
“We believe it is critical that Italy adopts a medium term package of gradual fiscal consolidation, gradual measures, gradual consolidation,” Thomsen told a news briefing.
“We believe that if these are good measures, credible measures, even in the short run they might not have a significantly negative, if any, impact on growth,” he said.
Hew added that Italy’s main long-term challenge was to overcome low productivity and high structural unemployment.
Reporting By Jan Strupczewski