Minister says Italy well- placed to face turbulence - Italian Economy Minister Tommaso Padoa Schioppa warned on Tuesday that Italy and the euro zone faced several months of turbulence on financial markets.
Padoa Schioppa was speaking at a meeting of EU economy ministers in Brussels, as Asian markets recorded a second day of heavy losses and European bourses showed severe jitters as they awaited the opening in New York.
''We have six difficult months ahead of us,'' the Italian minister said. ''It'll be half a year of financial turbulence'' which would probably bring ''difficult and unforeseen developments''.
In a bid to reassure the US markets, the Federal Reserve later announced it was cutting its main interest rate from 4.25% to 3.5%, its biggest cut since 1982.
The cut, decided quickly and outside the normal calendar of Fed meetings, was ''exceptional and without precedent,'' Padoa Schioppa said.
The Fed's move came three days after US President george W.Bush announced a $145 billion rescue package for the economy. On Tuesday he said further measures were possible.
Wall Street opened negatively, with the Nasdaq down 5% off the bell, but prices later recovered some ground. In Europe most indexes were initially negative as traders feared that the Fed's action was not enough to prevent a recession in the US but then they rallied.
Milan's bellwether Mib/S&P index closed with a gain of 1.18% compared to losses of 5.17% on Monday, when Europe's stock markets burned capitalisation worth 437 billion euros.
Addressing fears throughout the euro zone that the US economy could drag the European one into a downward spiral, Padoa Schioppa said Europe was placed ''infinitely better'' than the US at present.
''It is balanced on a macroeconomic level, both in terms of prices and public finances, while the US has a gigantic trade deficit and a low level of saving in both private and public spheres''.
But he warned that Europe was not entirely immune and acknowledged that the Italian government's growth forecast of 1.5% for 2008 would have to be scaled back.
The Bank of Italy recently predicted 1% growth for this year and the Confindustria association of industrial employers has put the figure at 1.3%.
''Clearly the latest estimates are closer to the ones we would offer at the moment,'' said Padoa Schioppa, a former member of the European Central Bank's board.
He said the government would produce a new forecast in May to replace the current one, which was calculated on the basis of the situation last September.
Meanwhile, consumer groups in Italy called on the ECB to follow the Fed's lead by cutting the European reference rate by 50 base points to 3.5%.
Padoa Schioppa said the position of Italian banks, who are hardly exposed at all to US subprime loans and the associated losses, was ''reassuring''.
