Tuesday, September 11 07:36:35
Italy's economy will return to growth in 2013, thanks to a decline in interest rates that is already taking place, Italian Prime Minister Mario Monti told CNBC television. "I see this growth happening first of all... through a decline in interest rates because these unduly high interest rates on Italian government securities are not yet reflecting the new and better fundamentals of the Italian economy and public finance," Monti told CNBC's Maria Bartiromo in an exclusive interview in Cernobbio, Italy on Saturday and broadcast in the United States on Monday. Italy has been in recession in 2012, and economists expect its gross domestic product to contract between 2.0 and 2.4 percent this year. Monti did not provide any estimate on Italy's expected GDP growth for 2013.
Finance Minister Vittorio Grilli said last week that he expects to release new estimates on 2012 economic growth later this month and that those will be in line with market views. Monti, who was appointed last November to lead a technocrat government, has reiterated on several occasions that the country's borrowing costs are too high. Last week's announcement by the European Central bank that it would launch a new and potentially unlimited bond-buying program to reduce the cost of financing government debt and fight the euro zone crisis has fueled renewed hopes for an imminent decline in yields.
"If the Euro-zone market calms down because of the announcement that the new instrument is available, probably the interest rates on the Italian government debt will go down gently and nicely and we will not need to use the instrument," Monti said. After the ECB announcement, the 10-year yield spread between German bunds and Italian BTPs fell slightly below 350 basis points, the tightest since April. Since then, the yields have been hovering around those levels, pending an uncertain week in which Germany's constitutional court rules on the legality of the euro zone permanent financial rescue fund. "I have a hope, not an expectation" on the result, which will be announced on Wednesday, Monti said.
According to Monti, the fiscal discipline and structural reforms that Italy has been implementing should be enough to push interest rates down. He ruled out any Italian request to the ECB for additional help ECB. But he also has said that any potential request should not be associated with any stigma. The plan "is constructed for those countries which are complying with the recommendations of the European Union. It is not a sort of bailing out instrument," Monti told CNBC. Amid renewed speculation that he would remain as the leader of the Italian government after elections next spring, Monti reiterated that he will not serve a second term. ( C) Reuters