Italy Finance Minister Sees Economy in Stagnation, Not Recession

(Bloomberg) -- Italy’s economy is probably in a phase of stagnation not recession, Finance Minister Giovanni Tria said in a newspaper interview, adding that the country’s deficit will be kept under control.

European Union fiscal rules are wrong and need to be changed to boost economic growth, Tria also said in the interview with Corriere della Sera published Sunday.

Italy Finance Minister Sees Economy in Stagnation, Not Recession

“I don’t see a recession, I see a situation of stagnation,” Tria said. He cautioned it was necessary to wait for the Jan. 31 release of the gross domestic product numbers for the final three months of last year to be sure.

The economy contracted 0.1 percent in the third quarter, and further shrinkage in the last quarter would signal a recession. A 1.6 percent decline in industrial production in November, in data released Friday, was the latest piece of negative economic data.

Italy is committed to cutting its debt and keeping the deficit under control, Tria said. The finance minister added that he is hoping for an economic pickup in the next two or three years, despite forecasts to the contrary.

Spending Gap

He acknowledged there had been differences of opinion within the government on how to target this year’s spending gap. The populist coalition eventually agreed to a reduced deficit target of 2.04 percent of GDP for 2019, after the EU rejected the initial goal of 2.4 percent.

“I was of the opinion that we had to maintain a more contained deficit,” according to Tria. “Then the economic situation got worse in Europe and in Italy.”

The Italian government has matured and understood the conditions needed to make a deal on the budget while a conflict between Italy and the EU is resolved “for now,” according to Tria.

Tria was the subject of constant rumors that he would resign, as the country sparred with the European Commission for weeks over this year’s budget. Tria said he had never drafted a resignation letter, “not even in my head,” adding: “It’s clear that if in the future the government goes crazy...”

Asked what keeps him awake at night, Tria said it’s the country’s unemployment rate, which stood at 10.5 percent in November, far above the 7.9 percent for the euro area as a whole.

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