IMF: Italy must enforce spending cuts
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The International Monetary Fund has called on Italy to guarantee “decisive implementation” of spending cuts in a bid to tackle the country’s growing debt.
According to reports, the IMF has said that Rome has been too optimistic on economic growth and that its plans on tax reform lacked detail.
Markets have tumbled in the past couple of days amid fear that the European debt crisis could spread to both Italy and Spain.
Italy’s finance minister, Giulio Tremonti, has already called for £42bn of cuts over three years, the aim being to bring the deficit down to zero in 2014 from its current level of 3.9 per cent of GDP. The yield on Italian 10-year bonds stood at 5.8 per cent on Tuesday, a level that analysts say the Italian government will have problems servicing.
An IMF report says: “IMF directors stressed that decisive implementation of the package is key and a number of them felt that more front-loaded spending measures would have a positive effect on market sentiments.”
The news comes as the Republic of Ireland saw its debt rating cut to junk status by ratings agency Moody’s yesterday, amid fears it may need a second bail-out. Republic of Ireland, Greece and Portugal have received a bail-out by the European Union and the IMF.
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