Roundup: Bank of Italy urges gov't to speed up reforms

The Italian government should broaden and speed up ongoing reforms to boost economic recovery and not disappoint the expectations of change, Bank of Italy governor Ignazio Visco said on Tuesday.

"Italy has undertaken a reform path which is internationally recognized," Visco said at the annual meeting of the central bank.

"To not disappoint the expectations of change, it is necessary to broaden the reforms' spectrum and speed up their implementation. Benefits are not always immediate, but this is further reason to act with a design and coherent plan," he added.

Italy's economy has started recovering in the first quarter of 2015, after three years of recession and stagnation, and this trend is expected to consolidate in the current year and the next, according to Visco.

Italy's economic and credit system is also benefiting from the bond-buying program launched by the European Central Bank (ECB).

Yet, the monetary policy alone is not enough to sustain growth in the long term, nor could it replace necessary reforms, the governor warned.

"The monetary stimulus alone is not enough to consolidate the signs of recovery," Visco said. "The impact on the domestic demand will be moderate and would run out in the medium term, if no structural action on the economy's growth potential is taken with tools able to increase productivity and employment together and create new income and new demand."

The governor acknowledged Prime Minister Matteo Renzi's cabinet is committed to the path of fiscal consolidation, and that it has tried to adjust the pace of reforms to the economic situation.

He also said the government's measures so far were going "in the right direction."

"The 2014 has been a year of great change (concerning) institutional developments and economic and monetary policy decisions in Europe, and an acceleration of reforms in Italy," he said.

Visco especially focused on the first positive results of a recently approved labor market reform in Italy, which aimed at overcoming a traditional dualism between those with a permanent contract and precarious workers.

Italy's unemployment rate is still at 13 percent, with a record-high 43.1 percent rate among young people. Yet, the number of new contracts grew in early 2015.

"Employment trends still reflect a weak demand and wide margins of unused production capacity," Visco explained. "The strong increase in open-ended contracts in early 2015... is a positive signal, and suggests employment could grow further and move towards more stable forms, if recovery consolidates."

The Bank of Italy's head also praised what has been done so far to overhaul Italy's huge public administration, but urged the government to do much more on this point.

He also insisted on increasing the school system's quality, and tackling the "intolerable levels" of corruption and criminal infiltration in economy and society.

His remarks came as the Italian Senate is set to discuss a cabinet-backed school reform, which has met with strong opposition by teachers, students, and also a part of Renzi's own majority party.

Finally, Italy's credit market is also improving, the governor said.

"New loans have been growing again since late 2014. Business loans in March have been 2.2 percent lower than the previous year, with a strong decrease in the decline we have been seeing for 3 years," Visco explained. Endit