The resilience of the Italian economy should make it possible for wages here to recover over the next two years, with soaring inflation linked to the Iran war currently eating into households' purchasing power, European Central Bank Chief Economist said in an interview with ANSA on Tuesday.
"In our September projections, we see that wages in Italy will grow faster than inflation in 2027 and 2028," Lane told ANSA.
"We believe that the strong performance of the Italian economy should allow for an improvement in real wages and living standards next year and the year after".
Lane emphasized the "fundamental solidity" of the Italian economy.
"Collectively, these very high energy prices represent a loss for the European economy," he added.
"And, unfortunately, it is impossible to say that all workers should be fully protected from this loss at all times".
When asked about criticism, including by politicians in Italy, of the ECB's rate hikes, Lane countered that: "inflation is very harmful and people really suffer if inflation gets too high.
"If the inflation rate had remained at 3% or 4% following the Russian-Ukrainian energy shock, with the ECB remaining inactive, that would have been very harmful to Italian workers and Italian households," Lane continued.
"If the ECB did not raise rates when necessary, inflation would be too high, and if people expected inflation to be too high, long-term rates would rise".
Lane also commented on the Italian government's request for greater flexibility in the application of the EU's budget rules for measures to help with the effects of high inflation.
"It is important that low-income individuals receive special protection through targeted measures," he said.
"A very broad, widespread fiscal expansion will not help.
"Income support within the (2027) budget law should be as well-targeted as possible, because a 'broad-brush' fiscal stimulus essentially boosts aggregate demand, and that will not help inflation return to 2% quickly".
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