IMF's Lagarde :Italian reforms lack credibility

The head of the International Monetary Fund, Christine Lagarde, has said that Italy's planned budgetary reforms "lack credibility". Italy agreed a limited package of budget reforms on Wednesday evening. But the Italian cabinet failed to agree to issue a decree implementing the changes, meaning that they must now go to a confidence vote in parliament. Ms Lagarde said the IMF would carefully monitor the implementation of reforms, after Italy invited it to do so. The IMF would also provide funds to stimulate Italy's economy under strict conditions, she said. "The problem that is at stake and that was clearly identified both by the Italian authorities and by its partners is a lack of credibility of the measures that were announced," Ms Lagarde told reporters. 'Crucial test' The G20 leaders, who completed a two-day summit in Cannes on Friday, welcomed Italy's invitation to the IMF to monitor its economic reforms. Italy's decision to call in the IMF is a response to the increasing pressure from eurozone leaders to reduce its debt levels. On Thursday, six former allies of Silvio Berlusconi wrote an open letter urging him to resign after his government failed to agree economic reforms. "Developments in Italy are a crucial test for the credibility of the anti-crisis framework set by the European Union," said Luigi Speranza of BNP Paribas. European Commission President Jose Manuel Barroso said that the commission would also step up its monitoring of Italy. A team from the commission will travel to Rome next week, he said.