World's elite gathers for Davos 2014

Italy Fin Min: Recovery under way, but jobs will lag

Italy coming out of 'severe recession': Fin min

The Italian economic recovery is under way with growth of 1 percent expected in 2014, but the job market will take a while to recover fully, the country's finance minister told CNBC.

"Italy is coming out of a severe recession and that's created problems particularly for the young people that are unemployed and that will take a while before the recovery has a positive impact on the job market," Fabrizio Saccomanni said at the World Economic Forum in Davos, Switzerland.

Towards the end of last year, youth unemployment in Italy hit its highest level on record at 41.6 percent.

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He added: "I think this is typical of a situation in which there is a sort of turnaround in the business cycle from recession to recovery, there are certain indicators that are lagging and others that are leading that show where the economy is growing."

Earlier in the day, Federico Ghizzoni, the CEO of Unicredit told CNBC that Italy was now part of Europe's cautious recovery, although it was slightly behind other countries in the euro zone. "We foresee growth in the range of 0.5 percent this year," Ghizzoni said.

"So it's not yet growth, it's kind of stabilization of the previous situation, but overall I can say the worst is behind our back. We have to be cautious because the problems are not sorted out completely, but better 2014 than 2013."

Ignazio Visco, the governor of the Bank of Italy, pointed out to CNBC the strengths and weaknesses of the economy at the start of 2014. "Both the credit and labor market are lagging behind the recovery of the economy, so what we are observing now is certainly a pick up of orders from abroad; manufacturing in Italy is a strong point; exports are doing fine; there has been an improvement in competitiveness, costs have been reduced," he told CNBC.

He added that "there is a slow and weak recovery, but we hope that it is on track. It has to be made stronger."

Italian banks have not had 'major crisis': Bank of Italy

Saccomanni said the government was on the right track with the new budget. The Italian administration managed to get its 2014 budget bill through the upper house of its Parliament by the end of 2013. The budget saw months of political wrangling and widespread criticism from businesses, trade unions and opposition parties who say it fails to do enough to aid Italy's stagnant economy.

"I think measures have already been taken to facilitate the employment of young people in the budget that was approved at the end of last year" he said, "and we are already taking measures that will facilitate the lending by SMEs which are the main sources of employments and we are extending government guarantee to banks that lend to SMEs."

Both Ghizzoni and Visco cited that the increase in non-performing loans was a cause for concern, although Ghizzoni said that he thought the number would stabilize more or less in the second half of the year.

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With former Prime Minister Silvio Berlusconi facing a new investigation in a prostitution case, some analysts may still worry about the political situation in Italy as well as its economic fragility.

Saccomanni said that he thought it was unlikely that another election would take place any time soon but mentioned an election in 2015.

"We have always thought that the results of the elections were not very conclusive because no party had enough majority, so maybe there could be an election after the European semester in the spring 2015," he said, adding "which will give us enough time to see the kind of measures that we have taken to revive the economy take hold."

—By CNBC's Kiran Moodley. Follow him on Twitter @kirancmoodley

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