ECB Economist Predicts Wage Recovery for Italy by 2027-28

European Central Bank Chief Economist Philip Lane has expressed optimism about the Italian economy's resilience, suggesting that wages in Italy will recover over the next two years despite the current challenges posed by soaring inflation linked to the Iran war. In an interview with ANSA, Lane noted that the ECB's September projections indicate wages in Italy will grow faster than inflation in 2027 and 2028, leading to an improvement in real wages and living standards.

Lane emphasized the 'fundamental solidity' of the Italian economy, which he believes will allow for a recovery in purchasing power for households. However, he acknowledged that high energy prices represent a significant loss for the European economy and that not all workers can be fully protected from this impact.

Addressing criticism of the ECB's rate hikes, Lane defended the necessity of these measures to combat inflation, stating that unchecked inflation would be harmful to Italian workers and households. He also commented on the Italian government's request for greater flexibility in applying EU budget rules, advocating for targeted measures to support low-income individuals rather than broad fiscal expansion.

Lane warned that a widespread fiscal stimulus could boost aggregate demand, hindering the return of inflation to the 2% target. He stressed the importance of well-targeted income support within the 2027 budget law to effectively address the effects of high inflation.