March 23, 2017 / 1:24 PM / 6 months ago

UPDATE 1-EU tells Italy to step up economic reforms before vote

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By Francesco Guarascio

BRUSSELS, March 23 (Reuters) - Italy should draw up ambitious reforms to address its economic weaknesses, one of the European Commission’s vice presidents said on Thursday, increasing pressure on the government to press on with unpopular measures before next year’s elections.

Italy, alongside other EU states, is preparing to send Brussels details of its medium-term plans to keep its budget under control and improve its economic performance, under the bloc’s fiscal rules.

The Commission had praised measures adopted by the government of former prime minister Matteo Renzi, in particular a labour-market reform that made it easier for companies to sack workers.

But some in Brussels wonder whether Italy will continue to have the stomach for tough measures needed to reduce its high public debt, given the rise of populist and eurosceptic parties in an increasingly fragmented political scene.

This year’s annual reform plan, drawn up by the government of prime minister Paolo Gentiloni and due in April, will be the last before next year’s February vote.

“We expect an ambitious national reform programme,” Valdis Dombrovskis told a news conference in Brussels, on the eve of a visit to Rome.

He said the reforms should address “structural shortcomings” in Italy’s economy, in particular high levels of public and private debt and low productivity.

Italy’s public debt is set to rose to 133.3 percent of the country’s gross domestic product this year, according to Commission estimates, instead of decreasing as required by EU fiscal rules.

To avoid an EU disciplinary procedure that may increase market pressure on shaky public finances, Finance Minister Pier Carlo Padoan has committed to present new measures in April to boost revenues by 0.2 percent of GDP, on top of the regular reform programme.

Dombrovskis said he would discuss the measures Italy intends to adopt at his meeting with Padoan on Friday. (Reporting by Francesco Guarascio; Editing by Philip Blenkinsop and Andrew Heavens)

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