Bank of Italy urges Renzi to continue reforms
ROME (Reuters) - Italy's central bank backed Prime Minister Matteo Renzi's calls for more fiscal flexibility on Tuesday, but also pointed to long-standing problems in the economy and called for reforms to be broadened and accelerated.
Bank of Italy Governor Ignazio Visco said reforms to labour market rules aimed at getting more people into permanent, full-time jobs had shown positive early signs, suggesting that as the economy picks up, stable employment could grow.
He also said the decision to insist on using the full margins for flexibility offered by EU budget rules, was the correct one.
However, Visco also pointed to deep-seated weaknesses that have held back Italy's economy for decades, ranging from a snail-paced justice system, weak schools, choking red tape, corruption and said the government had to do more.
"In order not to disappoint the expectations of change, the spectrum of the reforms must be broadened and their implementation accelerated," he said in a speech to the central bank's general assembly.
The latest admonishment from the central bank, days before an important set of regional elections, follows months of bruising battles over reforms to the labour market and the electoral system, which are set to continue in the months ahead.
They come as the government is trying to push new reforms to the school system through parliament in the face of stiff opposition from many in Renzi's own party.
Visco said the Italian economy, which returned to growth in the first quarter after three years of stagnation and recession, was set to grow this year although he noted that recovery was weaker than the euro zone average.
"There is still the risk, however, especially in the south, that the recovery will not be able to create jobs to the same extent as in the exits from past recessions," he said, referring to Italy's poor southern regions, where the economic slump hit hardest.
(Reporting by James Mackenzie; Editing by Susan Fenton)
