Italy must make structural reforms and maintain the commitment it made last month to cut its deficit and increase the flexibility of its economy, European Central Bank President Jean-Claude Trichet said.
In an interview with Italian business daily Il Sole 24 Ore on Friday, Trichet said that measures announced on August 5, when Prime Minister Silvio Berlusconi pledged to balance the budget by 2013, were "extremely important."
"It is therefore essential that the objectives announced for the improvement of public finances be fully confirmed and implemented," he said.
Trichet made no direct comment on the merits of the 45.5 bln euro ($64.8 bln) package currently making its way through parliament but said it was essential that Italy implement measures to allow full exploitation of its medium and long-term potential.
He said Italy's economic growth had been "disappointing" and that structural reforms were necessary.
"My message is clear: it is essential that all measures be introduced that are capable of enabling Italian potential to be fully realised in the medium term," he said.
The austerity package was passed by parliament in record time last month to calm a market panic that hammered Italian bonds and sent borrowing costs soaring to unmanageable levels over worries about Italy's huge debt pile.
However, the programme is currently undergoing amendment after coming under severe criticism, most recently from employers federation Confindustria, which on Thursday described it as "weak and inadequate".
INTERVENTION
After securing Rome's pledge for reform, the ECB stepped in last month to buy Italian government bonds and shield the euro zone's third-largest economy from a market selloff that could threaten the future of the single currency.
Trichet denied however that there had been a direct, negotiated agreement over the measures in a letter to Berlusconi's centre-right government sent just before the austerity plans was announced.
"We were seeing a progressive loss of investor confidence and we felt it would be useful to share with the Italian authorities our reflections on the most appropriate measures to restore market confidence," he said.
"There was no negotiation," he said.
Trichet repeated his longstanding call for governments in the euro zone to address weaknesses in their economies, step up mutual surveillance and reinforce governance.
"European countries must correct the present situation," he said.
Asked about the possibility of introducing common European bonds to shore up confidence in public finances in the euro zone, Trichet said that the European Financial Stabilioty Facility already issued bonds guaranteed by Europe.
"The main message of the governing council is to introduce rapidly, fully and totally, the decisions taken by the European heads of state and government on July 21," he said.
He was referring to a meeting of the European Council where EU leaders agreed on new crisis measures which still require parliamentary ratification in many countries.
