The European Union's Council of Economic and Finance Ministers (ECOFIN) on Tuesday gave its green light to Italy's updated stability program but said more was needed to reduce the debt and deficit.
According to Italian Economy Minister Tommaso Padoa-Schioppa, the green light from ECOFIN ''gives us the certainty that in May procedures against Italy for excessive deficit spending will be shelved''.
''Italy is now out of the intensive care unit and back in its hospital bed. However, it can only be released once it can balance its budget,'' he added.
Italy's plan was approved a day after the European Commission said that Italy should build on the success of reducing its spending deficit to below 3% of GDP in order to reach a balanced budget and ''place its public debt on a firm descending path''.
Italy remained at a ''medium risk concerning the long-term sustainability of its public finances, given current debt levels, and the adjustments needed to achieve the medium-term objective of a balanced budget,'' the EC said.
According to Joaquin Almunia, the European commissioner for economic and monetary affairs, Italy ''needs to stay the course on budgetary consolidation to put its debt firmly on a descending path and direct resources currently absorbed by interest expenditure towards growth-enhancing measures''.
Based on the EC's evaluation, ECOFIN recommended that Italy adopt more ambitious measures in its 2008 budget, fully implement pension reforms in order to reduce public spending and improve the efficiency and quality of public spending.
In regard to pension reform, Padoa-Schioppa said ''I have the impression that the EC is not adequately informed. In its recommendations it should have stressed the need to bolster efforts for structural reforms. There was less need to recommend the full application of pension reforms''.
