Top Stories
Top Stories

UPDATE 1-Bank of Italy warns public debt may rise more than forecast this year

year@ (Adds details)

ROME, May 31 (Reuters) - The Bank of Italy warned on Friday that the country's $2.6 trillion of debt may swell this year by more than the government forecasts and called for "credible" measures to curb it.

Concerns over Italy's public finances have pushed up Rome's debt costs since a populist government took power a year ago. The central bank's warnings helped to increase the risk premium Italian bonds pay compared with safer German debt to its highest since December, at almost three percentage points.

"The tensions in Italy's government bond market are curbing growth prospects," Bank of Italy Governor Ignazio Visco said in the text of a speech prepared for the central bank's annual meeting.

Visco said at the end of the debt as a percentage of gross domestic product year could top the 132.6 percent forecast set in the budget, which relies on the government managing to raise 18 billion euros from privatisations.

"The high debt-to-GDP ratio continues to be a severe constraint," he said. "There must be no delay in defining a rigorous and credible strategy for its reduction in the medium term."

Italy's debt-to-GDP ratio, second only to Greece's within the euro zone, has risen from a low of below 104% in 2007, before the financial crisis, to 132.2 percent at the end of last year. (Reporting by Stefano Bernabei, Giuseppe Fonte; editing by Valentina Za, Larry King)