IMF tells Italy 'decisive' action is needed for cutting its deficit
The International Monetary Fund warned Italy to take "decisive" action to slash its deficit today as it forecast slower growth for Europe's third-largest economy this year.
Fears over the nation's debt mountain - expected to stretch to 119% of Italy's output this year - have triggered market panic in recent days amid worries that it could be engulfed in Europe's sovereign debt crisis. Political rows between premier Silvio Berlusconi and finance minister Giulio Tremonti have also raised concerns over Italy's commitment to austerity measures.
The IMF believes Italy's economy is recovering but remains concerned by high public debt and sluggish growth. It forecast growth of just 1% this year, down from 1.3% last year. The IMF welcomed Italy's plans to eradicate the deficit by 2014 but added that "decisive implementation of the package is key" and pressed for more detail on tax reforms.
Italian bond yields blew out to record levels above 6% on Tuesday before the European Central Bank intervened to buy up debt.
Ireland's 10-year borrowing costs jumped above 13% today after ratings agency Moody's today warned that Dublin could need a second bailout and slashed its debt to junk status. The struggling nation's economy minister Richard Bruton said Ireland had been "caught up" in Moody's pessimistic view of the eurozone debt crisis.
