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Juncker warns Italian government over its struggling economy

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Juncker warns Italian government over its struggling economy
Italian Prime Minister Giuseppe Conte (L) with European Commission head Jean-Claude Juncker on April 2. Photo: Filippo MONTEFORTE/AFP
12:44 CEST+02:00
European Commission head Jean-Claude Juncker called on Tuesday for "extra efforts" from Italy's populist government to keep the increasingly stagnant economy growing, after talks with Italian Prime Minister Giuseppe Conte.

"I'm a little worried to see the Italian economy continuing to regress. I would like the Italian authorities to make extra efforts to keep economic growth alive," Juncker told journalists alongside Conte.

The budget agreed late last year between Rome and Brussels predicted one percent growth for 2019, but "we know today that this figure must be revised down," Juncker said.

Economy Minister Giovanni Tria on Sunday warned that Italy was headed for zero economic growth this year, while brushing off possible changes to the government's big-spending budget

READ ALSO: Italian economy slips back into recession

Italy's central bank and the International Monetary Fund have both estimated that the eurozone's third-largest economy would expand by a meagre 0.6 percent this year, while the European Commission was more pessimistic, pencilling growth of just 0.2 percent.

Italy's public debt now sits at 2.3 trillion euros, or 131 percent of Italy's GDP -- way above the 60 percent EU ceiling.

"Given Italy's heavy debt level, all policies revolving around the notion of relaunching the economy will have limited effect," Juncker said. 

"But we remain in contact to see how we'll move forward."

In the fourth quarter of 2018, the Italian economy contracted owing to a slowdown in exports, plunging it into a technical recession and increasing the government's budgetary problems.

The EU warned last week of a new row brewing with Italy over its budget, barely a few months after both sides agreed on a hard-fought deal with Rome's disputed 2019 finances.

Conte on Tuesday repeated that Italy's budget "will not change".

"Member states who have more fiscal room to manouevre must use it to support domestic demand and public investments, to allow Europe to fulfil its growth potential and face this negative trend," Conte said, in reference to Germany.

Germany, Europe's leading economy, is struggling at the moment owing to significantly weaker demand for its exports, and those problems have affected eurozone partners, with which it does much of its trade.

For 2018 as a whole, Italy's gross domestic product (GDP) increased by 0.9 percent.

Populist policies by Italy's coalition government have affected business investment, while consumer confidence has slumped as well.

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