ITALY - The introduction of pensions reform in Italy is not a priority, as the country will have one of the lowest increases in pensions spending among the advanced countries in the coming decades, according to the IMF.
In its fiscal monitor report, the IMF said it expected Italy's economy to grow weakly in the coming years and stressed that the main objective for the country was now to cut its deficit, not to implement further pensions measures.
Carlo Cottarelli, director of the IMF's fiscal affairs department, said: "On the longer-term trends in public finances, Italy has already implemented very important reforms in the pension system and more recently has strengthened this and has one of the lowest increases in terms of pension spending over the next 20, 30 or 40 years among advanced countries.
"So, for pension spending at the moment, something has to be done, but it is not the major problem.
"The major problem is the high level of public debt. Again, the current plan would allow a reduction in the debt-to-GDP ratio starting in 2013."
The fiscal monitor report predicted that the low economic growth assumptions would place Italy's deficit at around 1% of GDP in 2013, but it also stressed that this percentage would be the second-lowest among the G7 countries.
According to the report, Italy's debt-to-GDP ratio should stabilise in 2012 and start declining the following year.
This summer, Italy implemented further pension reforms, which mainly aimed to postpone the legal retirement age for women to 60 years and one month in 2014.
This legal retirement age is expected to increase progressively to reach 65 by 2026.
However, ratings agency Standard & Poor's yesterday downgraded the country's rating, citing political weakness as a key risk for the euro-zone's third-largest economy.
S&P said: "Even under pressure, Italian political institutions, incumbent monopolies, public sector workers, and public and private sector unions impede the government's ability to respond decisively to challenging economic conditions."
In its report, the IMF also conceded that the sudden increase of pressure on Italy could not be attributed to fiscal deficits but instead reflected mounting concern among investors about the two-way relationship between sovereign and financial risks, and about prospects for policymakers to craft a convincing and durable crisis resolution framework in the euro area.