Italy Still Needs ‘Deep Changes’: Finance Minister
Italy is making good progress in its program of economic reform but "deep changes" are still needed, Vittorio Grilli, Italy's economy and finance minister, told CNBC.
"We'll have to go through deep changes — not only [in] my country but also many countries to really face an increase in competition worldwide," he said.
"We have to keep pushing and keep progressing in our restructuring of the Italian economy," he added. He added that he realizes Italy needs "to convince the markets now that we are making good process and we are achieving results."
Italy's economy has contracted 2.4 percent year-on-year, according to gross domestic product (GDP) data released on Thursday, a sign that the country is still constrained by rigid labor markets and other inefficiencies that have stymied its competitiveness.
However, it fell less than expected in the third quarter, falling 0.2 percent compared to a forecast of 0.5 percent, leading some economists to hope that the country's economy had not shrunk as much as feared in 2012.
(Read More: Euro Zone in Recession)
This was the fifth quarterly decline in growth in a row, as the country tries to bring down its public debt of 126 percent of GDP to 114.4 percent by 2015.
There are concerns that forthcoming general elections could upset the reform program enacted by caretaker Prime Minister Mario Monti, as voter apathy, public anger at austerity measures and political infighting pervade Italian society and politics.
Grilli remained optimistic that both Italy and the euro zone would emerge from the economic crisis. He forecast that Italy would have flat growth next year, before returning to growth in the second quarter of 2014.
"We are sure that with our reform program have introduced in our economy major…output has already switched gear, but [it] will take some time before we really see it [growth]," he said.
All Roads Lead to Rome
Grilli insisted that Italy's economy was competitive and well-positioned to weather the economic storm hitting the euro zone, a region shown to be in its second recession since 2009 according to gross domestic product data released on Thursday.
"Our economic structure is very, very strong and [has] many, many dimensions," Grilli said.
"We have a very large manufacturing sector, second only to Germany. We are the second exporter in Europe. And our financial and banking sector is quite resilient to the crisis."
Grilli also lent his support to calls for a euro zone-wide banking union, which was called an "essential" route out of the crisis by the head of Spain's biggest bank on Thursday. However, there is some skepticism over giving up national bank supervision to an overarching European body.
European Central Bank Governing Council member and the President of Germany's Bundesbank Jens Weidmann said on Friday that while a banking union could support a stable currency union it was more important to get the design right than to put it in place quickly. "There is no point in building a new supporting pillar quickly, but on sand," he said.
Grilli, however, said it was important to implement the banking union according to the European Central Bank's 2014 timetable.
"We believe it's very important to...fully share the proposal by the commission both in the timetable and in the substance that they've put on the table," he told CNBC.
"We think that it's an integral part of there being a more integrated [and] stronger euro economy. And frankly, it's also part of establishing a much more integrated credit market with a single better supervision — we know that credit markets right now are still segmented along national border lines. This is not healthy," he said.
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Grilli refuted a recent claim by European Central Bank (ECB) official Joerg Asmussen that the euro zone is undergoing a "decade of adjustment."
"I'm more optimistic than that. I think we have living with deep crisis, certainly without precedent… since World War Two. The situation will need to progress for many years," he said. He conceded there was a long way to go before Italy would go "back to normal business."