World

OECD urges Italy stick with debt reduction measures as new PM Letta seeks to focus on growth

Italian Prime Minister Enrico Letta gestures as he speaks during a newas conference at EU headquarters in Brussels on Thursday, May 2, 2013. Letta has pressed for the creation of a full-fledged European banking union and said he wants results before the EU summit next month. (AP Photo/Virginia Mayo)

Italian Prime Minister Enrico Letta gestures as he speaks during a newas conference at EU headquarters in Brussels on Thursday, May 2, 2013. Letta has pressed for the creation of a full-fledged European banking union and said he wants results before the EU summit next month. (AP Photo/Virginia Mayo)  (The Associated Press)

The Organization for Economic Cooperation and Development says Italy must continue to bring down its public debt and make permanent spending cuts, even as the country's new premier calls for a greater focus on economic growth to end the recession.

The OECD, a global economic watchdog, forecasts Italy's economy will shrink by 1.5 percent this year and only register a 0.5 percent growth in 2014, worse than the government's own projections.

In its report Thursday, the OECD also estimated that Italy's debt would rise this year to 131.5 percent of annual GDP, well over the 127 percent in 2012. Next year, it forecasts it at 134.2 percent.

The debt ratio of Italy, which has the third largest economy in the 17-country eurozone, is second only to that of Greece.