Friday, June 7, 2013

ECB's Draghi was misunderstood on policy plan: Italy minister

FLORENCE - European Central Bank President Mario Draghi was "a little misunderstood" on Thursday and is not planning on tightening monetary policy, Italian Economy Minister Fabrizio Saccomanni said on Friday.Saccomanni's comments come after the ECB left interest rates unchanged on Thursday and said that he did not yet see the need for unconventional financing measures to lift growth."The markets interpreted some messages from the Federal Reserve to be that we are heading towards a phase of monetary tightening, and maybe the failure to reduce rates (by the ECB) was interpreted as a confirmation," Saccomanni said at a business conference in Florence."But I believe that in this case he was a bit misunderstood," said Saccomanni, who worked under Draghi at the Bank of Italy.Saccomanni said Draghi had indicated he was "willing to take more expansive measures".Short-term money market interest rates rose on Thursday after the ECB decision and Draghi's comments.Investors had been pricing in a deposit rate in negative territory, which would effectively charge banks for parking money at the ECB and help kick start lending to businesses and consumers."There is international consensus on the fact that we have yet to exit this crisis," Saccomanni said.Italy, the euro zone's third-biggest economy, is worse off than others. It is mired in its longest post-war recession, which began in mid-2011, and unemployment has hit record levels.Saccomanni said that the Italian government planned to revise, not abolish, the much-hated property tax (IMU) so that it weighed less on people with lower incomes, hopefully by the first half of August.Four-times Prime Minister Silvio Berlusconi has called for the tax to be scrapped or else his People of Freedom party will pull its support for the right-left coalition government.But Italy has promised to keep its budget deficit below 3 percent of output, and removing the tax as Berlusconi wants would cost an estimated 4 billion euros ($5.29 billion) per year.Funding of the tax reform will come from spending cuts and changes to tax breaks, Saccomanni said.($1 = 0.7564 euros. 

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