EU’s Dombrovskis Pushes Damaged Italy to Do More to Reduce Debt

(Bloomberg) -- Uncertainty about the Italian government’s policies has damaged the country’s economy and weighed on the broader euro-area outlook, European Commission Vice President Valdis Dombrovskis said.

Italy must put its government debt, the largest in the euro area, on a clear downward path and maintain responsible fiscal policies, Dombrovskis said in an interview with Bloomberg Television in Brussels on Wednesday.

His comments come as the commission, the European Union’s executive arm, is set to present its assessment of economic policies across the bloc’s members, and warn Rome that the country is experiencing “excessive imbalances.”

“Of all 28 EU economies, the slowdown in Italy has been more pronounced,” Dombrovskis said in an interview with Bloomberg Television in Brussels on Tuesday. "We see that this damage which was created to the economy by uncertainty on the government’s fiscal plans has now really resulted in slower economic growth."

Italy’s economy has shrunk for two straight quarters, putting it in a technical recession, and the commission forecasts that it will barely grow this year. The 0.2 percent GDP prediction for 2019 compares with a 1.3 percent pace forecast for the euro zone as a whole.

Dombrovskis said the slowdown in the euro-area economy appears set to drag on, with the currency region beset by political strife and global risks such as mounting trade protectionism.

He also reiterated the commission’s advice to Germany to boost spending in order to help its economy, which has in recent months seen signs of weakness. "The commission’s advice in the last couple of years has been to stimulate the demand side of the economy and put more money on investment," Dombrovskis said. "This advice remains valid now."

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