14 Jul 2011

Italy urged to act decisively over budget cuts

5:10 am on 14 July 2011

The International Monetary Fund has asked Italy to ensure ''decisive implementation'' of spending cuts to reduce the country's debt.

The BBC reports Italy may be the next country to be hit by the eurozone's debt crisis.

The IMF also said that Greece needs an additional 71 billion euros ($US100 billion) in EU aid and 33 billion euros from private creditors. And it pushed back Greece's return to the capital markets to 2014.

Concern about Italy's finances has led to the government moving ahead with plans for an austerity budget.

The IMF said Rome may be being too optimistic about economic growth.

It added that Italy's plans on tax reform lacked detail, and that the Italian government had to do more to boost the economy.

''Only sustained growth will reduce the burden of public debt,'' it said.

The IMF predicts that the Italian economy will grow by 1% this year, down from 1.3% in 2010.

Finance Minister Giulio Tremonti is proposing 48 billion euros ($US67 billion) in budget cuts over three years and aims to cut the deficit to zero by 2014 from this year's 3.9% of gross domestic product.

In a sign that investors are worried about Italy's financial situation, the BBC reports the yield on Italian 10-year bonds on Tuesday increased to 5.8%, before falling to 5.6% on Wednesday.