Governor of the Bank of Italy warns on recession

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According to the governor of the Bank of Italy, the Italian economy will shrink in 2005 for the first time since 1993 before growing just slightly in 2006. Antonio Fazio told the upper house of Italys parliament on Friday that the nations gross domestic product will decline by 0.1 percent this year and then grow by 1.3 percent next year. These estimates are not far from the governments targets, set at 0 percent growth for this year and 1.5 percent growth in 2006. In noting this fact, Mr. Fazio said that 1.3 percent growth is reachable in 2006, but it will not be an easy task. He said that the forecasts had been reached in cooperation with other central banks in the eurozone and commented that the depreciation of the euro was actually a good thing for Italy due to the help it provides on exports. Mr. Fazio also worried about the lost competitiveness of Italy, citing the decline in the countrys industry over the long term. As a step toward growth in the future, Mr. Fazio called for a six-month program of investment into the nations infrastructure as well as for a cut in corporate taxes, to be funded by a reduction in public spending. Mr. Fazio also repeated comments he had made previously that the Italian economy had likely hit bottom in the first quarter of the year and that improvements should be visible when the April through June figures are released.