May 29, 2018 / 10:59 PM / 25 days ago

U.S. Treasury sees Italy better off in euro zone: official

WASHINGTON (Reuters) - The U.S. Treasury believes it would be better for Italy and other euro-zone countries to work out their issues with no major changes to the bloc, a senior Treasury official said on Tuesday as Italian political and market turmoil emerged as a key topic for a G7 finance leaders meeting this week.

Speaking to reporters, the official said that Treasury was tracking Italy’s political turmoil closely, but he has not seen any systemic impact from volatility in Italian and international markets that was a concern for the United States.

“It would be better if they were to work things out within the euro zone without making significant changes there, and certainly the Italians have the opportunity to do that,” the official said.

Italy, the euro zone’s third largest economy, suffered its biggest market sell-off in years after the country’s latest failure to form a government sparked worries about new elections that could lead to a bigger mandate for euro-skeptic politicians and cast doubt on Italy’s future in the euro zone..

The turmoil hit U.S. bank shares and caused a sell-off of euro assets and a rush into safe-haven Treasury debt, sending the dollar to a 10-month high against the euro.

The Treasury official said it was unclear who would be representing Italy at the G7 finance ministers and central bank governors’ meeting on Thursday, Friday and Saturday in Whistler, Canada. He said the International Monetary Fund would likely be leading the discussion on global risks.

Reporting by David Lawder; Editing by James Dalgleish and Leslie Adler

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