Italian banks must start lending: OECD

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14:51 CET+01:00
Restricted lending by Italian banks is hampering the country's recovery, the Organisation for Economic Cooperation and Development (OECD) said on Tuesday.

Bank lending in Italy has shrunk significantly, with higher interest rates charged to borrowers in comparison with other countries, thus restricting investment, the organisation said in its Economic Outlook report.

The OECD also warned that sustained reductions in public debt were necessary to help trigger economic growth. That growth relies on steps being taken both by the government and Italian banks.

“Further measures to promote growth and improve competitiveness need to be implemented to return Italy to healthy growth,” the report said

Meanwhile, the chief of Italy's Banca Monte dei Paschi di Siena, which is on the road to recovery after receiving a government bail-out to the tune of €4bn earlier this year, said on Monday that Italy needs to overhaul its cumbersome bureaucracy, particularly when it comes to banking transactions. READ MORE HERE - 'Italy must overhaul bureaucracy': MPS chief

There was, however, some positive news for Italy. The OECD forecasts a rise in demand from both foreign and domestic markets as confidence grows in the Italian economy.

Data released on Tuesday showed that foreign orders are lifting Italian industry even as the domestic economy wallows. READ MORE HERE - Foreign orders boost Italian industry

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Still, the country's unemployment rate - which now stands at 12.5 percent - is set to remain high, while working hours for those already in employment will likely increase, the OECD said.

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