Now Italy sparks alert in new fears over debts crisis
THE EU debt crisis appears to be deepening as Italy becomes the newest country to be told to bring its debt under control.
The European Union Monetary Affairs Commissioner Olli Rehn warned the Italians that they must bring their debt under control after they cut their economic growth outlook and raised their debt forecasts.
With Greece on the ropes and increasing anxiety about the viability of the Spanish, Portuguese and Irish economies, news that Italy is also struggling is bad news for an embattled eurozone.
"Italy finds itself in a different situation from other countries because it hasn't distributed massive budget stimuli," he said.
"But it has a very high debt, and the dynamic of that has to be put under control. In Italy, the process of public accounts consolidation must be intensified."
An EU-IMF agreement on a s750bn emergency package to stabilise the eurozone was agreed at the weekend as fears grew about the future of the single currency.
The Italian economy ministry said the primary budget balance would be improved by a total of 1.6pc of gross domestic product with measures worth 0.8pc in 2011 and the same in 2012.
The Italian government is likely to bring forward to this month budget correction measures worth some €25bn to fulfil its 2011-2012 deficit-cutting targets, a source closed to the matter said.
"We are looking at... the package of measures," Mr Rehn said.
He said Spain and Portugal needed to consolidate budgets urgently and beyond these, "there are other countries that need to take new measures".
"I am expecting, therefore, that all eurozone (countries) will tell the Eurogroup on Monday what they plan in concrete terms," he added.
"You have to find the right balance between exit strategies from budget imbalances and reinforcing economic growth. Whoever has the space must continue with stimuli," Mr Rehn said, citing Germany as an example.
Mr Rehn said Europe as a whole risked weak growth if countries failed to stimulate internal demand even though their exports were strong.
"No one wants to weaken great performances on the export front. But that has to be balanced otherwise there will always be weak economic growth not just in the south of euro land but in the whole European Union."