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Bank of Italy urges ECB to be cautious in withdrawing stimulus

The headquarters of the European Central Bank (ECB) and the Frankfurt skyline with its financial district are photographed on early evening in Frankfurt, Germany, March 25, 2018. REUTERS/Kai Pfaffenbach

ROME (Reuters) - The Bank of Italy on Friday urged the European Central Bank to be cautious in making euro zone monetary policy less expansionary, warning of the risks of a sudden end to asset buying or sharp rises in interest rates.

“It’s necessary that monetary policy remain expansionary for a long time,” Fabio Panetta, one of the Italian central banks’s four executive board members, said in a speech.

Normalizing monetary policy can be achieved without causing a negative shock for the euro zone economy or the financial system “as long as it is done in a context of robust growth and in a gradual way,” said Panetta.

Italy is the euro zone’s most sluggish economy and has its second highest public debt as a proportion of national output.

Reporting By Gavin Jones