Italy Fin Min, Ctrl Bk See Risks To '06 1.2% GDP Target-2
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The Group of Seven warned in a statement that oil prices, which climbed to a new record Friday of $75.17 a barrel on the New York Mercantile Exchange, ever-expanding trade imbalances and growing trade protectionism could interrupt the world economy's best growth streak in 30 years.
The big U.S. trade and budget deficits will cause the dollar to fall, some analysts predict.
"This is how I see it: the dollar will probably weaken, rates rise and our currency strengthen," outgoing Finance Minister Giulio Tremonti said, painting a scenario that would put Italy's export-driven economy in trouble.
He added persistently high oil prices were also a threat to growth, expressing concern for recent developments in energy-rich countries like Iran, Venezuela, Nigeria and Russia.
The Italian economy ground to a halt last year on weak exports and consumer demand.
But Draghi pointed to recent strength in Italian industry sales figures, and another Bank of Italy official addressing reporters even said the central bank may slightly increase its growth prediction for the first quarter, which is between 0.3% and 0.4%.
However, Draghi warned of many risks ahead. He noted that a 10% rise in oil prices reduces Italian gross domestic product by some 0.2 percentage point, while a 10% appreciation in the euro hits growth in the 12-country euro zone by between 0.2-0.4 percentage point.
Italy Fin Min, Ctrl Bk See Risks To '06 1.2% GDP Target-3
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Italy's stagnant economy has underperformed the already weak euro zone in 14 of the last 15 years. In the past, governments would devalue the currency to boost exports, but with the euro common currency, that's no longer possible.
A party in the outgoing government of Premier Silvio Berlusconi has suggested Italy should leave the euro zone, and Italian papers this week gave prominent coverage to a Financial Times column saying the country could drop out of the euro within a decade due to its weak economy.
Seeking to quash such speculation, Draghi said "I think Italy will stay in the euro whatever the government."
The central bank governor also said no agreement had been reached to give the euro zone a single representative seat in the International Monetary Fund.
Instead, officials have agreed to give more voting power within the IMF to China, Mexico, South Korea and Turkey at an upcoming meeting in Singapore in September, Draghi said.
-By Luca Di Leo, Dow Jones Newswires; +39 06 6782543; luca.dileo@dowjones.com
(END) Dow Jones Newswires
April 22, 2006 14:38 ET (18:38 GMT)
Copyright (c) 2006 Dow Jones & Company, Inc.- - 02 38 PM EDT 04-22-06 |
