OECD chief economist urges no panic over Italy
Thursday, 14 June 2012 | 11:00
Panic over Italy following Spain's bailout is unjustified because Rome's fundamentals have not changed, the chief economist of the Organisation for Economic Cooperation and Development said on Wednesday.
But if government borrowing costs were to remain at current high levels for long, Italy would face heavy consequences, Pier Carlo Padoan said in an interview with Italian daily Il Messaggero.
"There are no changes to the country's economic fundamentals that can justify an attack on Italy," said Padoan.
"Among OECD countries, Italy is one of the closest to a stabilization of its debt. If there wasn't the contagion factor, steps taken so far towards recovery would be the right ones."
Padoan said that after decisive measures on the fiscal front, Italy should undertake bolder steps on growth.
European governments, he added, have made some mistakes by intervening too late and often with measures deemed insufficient, he said, stoking investors' fears that the euro zone crisis cannot be contained.
This is affecting Italian debt yields as the country has come under the spotlight after the Spanish aid package.
"The current situation reflects the fact that it is not clear to markets what political leaders and policy makers want to do," Padoan said.
"It is therefore urgent to break this vicious circle."
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