Bank of Italy chief sees signs of recovery

But Visco warns political instability is a threat

Bank of Italy chief sees signs of recovery

(see related story on political situation) Rome, September 10 - Bank of Italy Governor Ignazio Visco said on Tuesday that the country's economy was showing signs of recovery, and that production levels were reaching an important a turning point. But he also warned that political instability posed a threat to the recovery, with Premier Enrico Letta's government in danger of collapsing in the fallout of the supreme court's decision last month to uphold a tax-fraud conviction against Silvio Berlusconi. ''Recent indicators show a gradual improvement (in the economy),'' Visco said. ''The fall in production should stop in the coming months''. Visco also warned that: ''the downside risks to this scenario are heightened by investors' concerns about possible political instability,'' making reference to worries over the fragility of Italy's unprecedented right-left coalition government. ''Recovery is now at hand but downside risks remain significant. If we want to seize the opportunity we cannot relax our efforts,'' Visco declared. ''The key to success will be the shared determination to move towards a European Union in all respects. At this stage, the test of our determination is the construction of an effective Banking Union,'' Visco added.

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