Italy's economy will post practically no growth this year, and the outlook for public finances is worsening, the head of the International Monetary Fund's (IMF) Italy desk said today.
Speaking at a conference in Rome, Pier Carlo Padoan said Italian 2005 growth would be "around zero", the same projection made by Bank of Italy Governor Antonio Fazio at the end of May.
The IMF's most recent official forecast - made in April before Italy registered a 0.5 per cent GDP contraction in the first quarter - envisaged 2005 growth of 1.2 per cent.
Mr Padoan said the weaker outlook would have a negative impact on the budget deficit, which in April, under the more favourable growth scenario, was already being projected by the IMF at 3.5 per cent of GDP, well above the European Union's 3 per cent limit. He did not offer a new deficit forecast.
Mr Padoan also had scathing words for the recent proposal by the Northern League for Italy, a junior party in the coalition government, to ditch its euro membership.
"It's total madness, it would have costs which infinitely outweigh the benefits, even assuming there are any," he said. "The fact that this idea is part of the political debate doesn't help Italy's image in the world, it's a sign of desperation, of an incapacity to find solutions."