ROME (Reuters) - Prime Minister Mario Monti on Tuesday set out Italy’s priorities for growth in the euro zone, calling for changes in the way budget deficits are calculated and urging the EU Commission to be more active in setting a growth agenda.
Speaking at a conference attended by EU Economic and Monetary Affairs Commissioner Olli Rehn, Monti said the time for studying and talking about how to boost the euro zone’s stagnant economy was over.
“I exhort Commissioner Rehn and the Commission to take a very active and leading role,” said Monti.
He called for changes in EU budget rules to allow governments to pay outstanding bills to the private sector without pushing up their budget deficits, and greater distinction between public investments and other types of spending.
The issue of late payments by the public sector is under the spotlight in Italy, where firms are being squeezed by a lack of liquidity and the state is notoriously slow in settling bills with the private sector, estimated at least 60 billion euros.
Monti said budget deficit calculations should distinguish between “virtuous” public investments and less productive state spending, something so far resisted by Germany and some other northern European countries.
“I am inviting my German interlocutors to consider that increasing production capacity through public investments is a virtuous policy,” he said.
Rehn said he “took due note” of Monti’s concerns on late payments and the Commission also wanted to increase cross border investment in the green economy, and research and innovation.
Monti also said he was convinced that it will not be long before the euro zone decides in favor of commonly issued bonds, another policy long favored by Italy, which has high borrowing costs and one of the highest public debts in the euro zone.
“I am convinced it will happen, not immediately, but the time is getting nearer and I consider it positive and important,” Monti said.
Germany says the idea is premature until fiscal discipline is better established in the currency bloc.
Rehn applauded Monti’s reform efforts since taking office in November , but warned that the government’s draft labour reform, currently before parliament, must be approved quickly and not watered down, or market confidence in Italy could be eroded.
“Any further delay would be damaging for the credibility of Italy’s reform process,” he said. “It is vital that the objectives remain commensurate to challenges of Italy’s labour market.”
Monti also said he did not believe his technocrat government would be jeopardized by the results of local elections in Italy on Sunday and Monday.
The vote saw heavy losses for the centre-right PDL, a key party in his majority, and big gains for opposition parties, including The 5 Star Movement which campaigns for Italy to leave the euro and default on its debt.
Editing by Jon Hemming