Squinzi says Italy in real danger of deflation

(ANSA) – Brussels, November 6 – Italy is in a dangerous condition of deflation that could cause real harm to the struggling economy, the head of big-business lobby group Confindustria said Wednesday. “The fact that inflation is decreasing although there has been an increase in (value-added taxes) means that we are in a situation of real deflation, and this is worrying,” Giorgio Squinzi said outside meetings in Brussels with European Union officials. Deflation, a general drop in the costs of goods and services, is a sign of a very sluggish economy such as Italy is enduring – the country recently recorded its ninth straight quarter of economic loss. Growth would be boosted by lower employment taxes, something that still may be possible despite disappointments in the initial version of the budget bill from the government of Premier Enrico Letta, said Squinzi.

He said because that bill is still being revised and redrafted, there is hope of improvement.

The priority for business is an “intervention on the cost of labour (because) we need to rediscover growth,” said Squinzi.

Business and labour groups have called on the government to reduce labour costs for both employers and workers, to stimulate job creation and increase incomes.