Italy PM urges EU to drop austerity drive

Italy’s prime minister has urged the European Union to drop its insistence on austerity policies and promote initiatives fostering growth instead.

Prime Minister Enrico Letta said on Tuesday in Germany that “it is absolutely necessary” to foster growth and job creation to help the 27-nation bloc’s stalling economies “so that our citizens see Europe not as something negative but as something positive”.

Letta’s visit to Berlin for talks with Chancellor Angela Merkel marked his first official trip abroad and came only hours after his winning approval by the Senate in Rome.

Merkel said she saw no contradiction between budgetary discipline and the goal of economic growth.

“For us in Germany, budgetary consolidation and growth are not at cross-purposes but have to go hand in hand to lead to greater competitiveness and therefore more jobs,” conservative Merkel told a joint news conference ahead of private talks with centre-left Letta.

Unemployment ‘core issue’

Merkel laid out Germany’s case, saying the aim was for “Europe to emerge stronger from the crisis” than before and to restore confidence, with every country handling its unique challenges.

She said fighting unemployment was the “core issue” for Europe and would require more investment, “breathing space” for companies and less bureaucracy.

Italy has committed to remaining within an EU deficit limit of 3 percent of gross domestic product, but Letta has made clear he hopes to ease painful austerity measures in order to stimulate an economy in deep recession.

He has announced the immediate suspension of an unpopular tax on primary residences while he makes it fairer to less affluent taxpayers. He also pledged not to raise the sales tax and to reduce some payroll taxes.

Italy, the eurozone’s third-largest economy, has suffered years of anaemic growth and is currently in recession.

The unemployment rate is 11.5 percent and almost 40 percent of those younger than 25 have no job, according to EU statistics.

Italy’s debt burden has grown to over 120 percent of the country’s annual economic output – trailing only Greece’s debt level.