Bonds News

UPDATE 1-Renzi says Germany should cut trade surplus to help Italy

(Adds Merkel)

ROME/BERLIN, March 16 (Reuters) - Italian Prime Minister Matteo Renzi said on Wednesday that Germany and other north European nations need to cut their trade surpluses in line with EU guidelines to help Italy’s struggling economy.

Berlin is under international pressure to spend more on infrastructure. Euro zone peers as well as the European Commission have called on it to boost domestic consumption in order to reduce its big trade surplus.

Addressing parliament ahead of an EU summit in Brussels, Renzi repeated his call for the European Union to give Italy more budget leeway to cut taxes, saying stimulus by the European Central Bank was not enough to boost the Italian or European economy.

Italy also needs help from Germany and its allies, he said.

“If we really want to get this country going, Germany and other countries need to reduce their trade surplus, today at 7.6 percent in Germany,” Renzi said.

He called on Angela Merkel’s government to reduce the trade surplus to 6 percent of gross domestic product and added that the Netherlands “and other countries” need to take similar steps.

Speaking at a business event in Berlin, Merkel rejected any criticism, saying Germany’s strong export performance was a result of companies’ competitiveness as well as a weaker euro exchange rate.

“So when the euro devalues that strongly as a result of monetary policy, then of course nobody should be surprised that our exports tend to rise,” Merkel said, adding Germany could not be blamed for that.

Germany’s trade surplus jumped to nearly 248 billion euros last year from 213.6 billion in 2014. However, the government expects exports to rise at a slower pace than imports this year due to an emerging markets slowdown. (Reporting by Gavin Jones in Rome and Thorsten Severin in Berlin,; Writing by Michael Nienaber; Editing by Crispian Balmer/Ruth Pitchford)