Italian minister warns ECB of risk from higher interest rates

CERNOBBIO, Italy

The outlook for the Italian economy is improving but higher interest rates designed to curb inflation could pose a threat to growth, Italy’s economy minister said on April 1, sending a warning to the European Central Bank (ECB).

“Fighting inflation with monetary policy is not enough, recession cannot be the price paid for fighting inflation,” Giancarlo Giorgetti said.

Giorgetti is from the League party which last month criticized the ECB for pushing ahead with its latest 50 basis point rate increase despite turmoil in the banking sector.

Speaking to the Ambrosetti business forum, Giorgetti confirmed that improvements in the first half of the year would allow Italy to slightly upgrade its official forecast for economic growth of 0.6 percent in 2023.

“The forecasts for 2023 are improving, we expect positive monthly variations in GDP in the first half of the year which will lead us to slightly revise upwards the 2023 growth goal which was prudently indicated at +0.6 percent,” he said.

“For the continuation of the year, although a further acceleration of economic activity is possible, we will continue for prudential reasons to assume a moderate rate of growth.”

Giorgetti added it would be difficult for the European Union when it comes to reintroducing budget rules that remain suspended until the end of 2023.

“The political climate of relaxation generated around budgetary rules in these crisis years by COVID and war will not make it easy to return to any rule,” he said.