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Europe would 'very much appreciate' Italy sticking to the rules, ECB member says

Key Points
  • Newly-appointed Bank of Finland Governor Olli Rehn said that the ECB does not take action regarding one single country, instead it responds to the euro zone as a whole.
  • Rehn is positive about the growth rate in the euro zone this year.
ECB's Rehn: Euro area needs to deal with Italian finances

Italy should stick to its promises and respect Europea's fiscal rules, a member of the European Central Bank told CNBC on Thursday.

The comments from Olli Rehn, governor of the Bank of Finland and member of the ECB governing council, came as Rome is preparing its future spending plans.

"It would be very much appreciated if Italy were able to stick to its promises and stick to its commitments as regards the stability and the growth pact — the set of European fiscal rules — because we all live in the euro area and every member state is expected to respect the rules," Rehn told CNBC's Annette Weisbach in Helsinki.

The Italian government sparked further tensions with its European counterparts last week after announcing that it is to increase spending in 2019, meaning that public deficit will reach 2.4 percent of gross domestic product (GDP).

The previous government in Rome had told the European institutions that Italy's deficit would be 0.8 percent in 2019.

Such a significant increase in spending has not been well-received by some officials in Brussels. European Commissioner for Economic Affairs Pierre Moscovici said Wednesday that the 2.4 percent deficit figure risks breaking European rules.

Italy's coalition government is finalizing the details of its 2019 budget, which it has to send to the European Commission for analysis by October 15. At the moment, there is some uncertainty about the spending plans for 2020 and 2021.

"If I were an Italian, the fundamental question would be, how can you advance productive and innovative capacity of the Italian economy? There's tremendous entrepreneurial potential in Italy and the key question to my mind is how to unleash that potential for productivity purposes," Rehn told CNBC.

The newly-appointed governor also said that the ECB does not take action regarding one single country; instead, it responds to the euro zone as a whole.

"As regards the future path of discussions on the Italian public finances, that is something for the European Commission and Eurogroup," Rehn said.

Growth forecast

ECB's Rehn: Seeing stronger wage growth in central Europe

Rehn also said that the euro zone should continue growing at a rate of about 2 percent in 2018, although this pace could slow down in the two years after that.

"The growth outlook remains quite strong, I am quite positive," he said.

"Our forecast by the Bank of Finland is roughly 2 percent growth for the euro area this year and some more subdued growth in the coming two years, assuming that the political uncertainties in the global economy will not derail the ongoing economic recovery in Europe," Rehn added.