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Leaders of Spain, Italy push shift to growth

Prime Minister Enrico Letta of Italy (left) met with Spain’s prime minister, Mariano Rajoy, in Madrid Monday.

J.J. Guillen/EPA

Prime Minister Enrico Letta of Italy (left) met with Spain’s prime minister, Mariano Rajoy, in Madrid Monday.

MADRID — The premiers of Spain and Italy teamed up Monday to push the eurozone to focus more on spurring economic growth instead of just reducing debt — a move they hope will reduce high youth unemployment and speed up a banking reform effort aimed at stabilizing Europe’s financial system.

After meeting with Spain’s prime minister, Mariano Rajoy, the premier of Italy, Enrico Letta, warned that inaction could prompt rising anti-Europe sentiment among voters across the continent, resulting in political punishment for leaders who support the 17 nations that use the euro currency.

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Letta said the European Union risks driving its supporters away if it fails to offer a positive view of economic and political integration and is only the bearer of bad financial news.

Europe must focus on getting more young people into the workforce and alleviating the financial hardships ordinary people face, he said. If a June EU summit ends with another ‘‘bureaucratic, routine, formal’’ result, the 2014 elections for the European Parliament could see a rise in anti-European parties.

‘‘We risk having a European Parliament that will be the most anti-European Parliament ever,’’ he said. ‘‘We have to do something to avoid that.’’

Rajoy defended tax hikes and other measures he invoked last year to reduce Spain’s deficit and comply with eurozone demands to shore up Spain’s finances and save its banking system. But he agreed with Letta that more must be done to cut youth unemployment and free up frozen credit for small and medium-size businesses.

‘‘National reforms should be accompanied by European Union reforms,’’ he said.

‘We risk having a European Parliament that will be the most anti-European Parliament ever. We have to do something to avoid that.’

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Sharp spending cuts and tax increases have reduced deficits, but pushed the eurozone into a deep recession. Financially weaker countries like Italy and Spain are not expected to recover before next year, and unemployment is at record highs, particularly among the young. The jobless rate is 57 percent for Spaniards under age 25 and 38 percent for those in Italy.

Critics of austerity measures say governments should stimulate the economy, even if it includes more spending, to pull their nations out of downward economic spirals.

Since coming to office eight days ago, Letta has been on a whirlwind tour of Europe to meet with other top leaders and lay out his desire to ease the impact of austerity measures.

Before meeting with Rajoy, Letta called Spain an ‘‘ally to make Europe the continent that places more attention on growth and social discomfort.’’

Still, he acknowledged Italy cannot return to its old ways. Its debt is the second-highest in the eurozone, after Greece’s, at 127 percent of annual GDP.

Letta did not specify how his government would create growth without adding to debt. Italy has the third-largest economy in the eurozone; Spain’s is the fourth-largest.

Letta’s government has frozen a tax on first homes, scrapping a June payment while ministers consider alternative policies. The EU has warned Letta’s government that if it cancels the tax, it would have to find $5.2 billion in revenue elsewhere.

Economic figures released Monday underscored the heavy task awaiting Letta.

The national statistics agency forecast that Italy’s economy will shrink 1.4 percent this year before rising 0.7 percent in 2014. The Organization for Economic Cooperation and Development, a global watchdog, forecasts a 1.5 percent contraction this year and 0.5 percent growth in 2014.

The main forces arguing in favor of continued debt reduction have been Germany and the European Central Bank.

On Monday, ECB president Mario Draghi repeated that without sustainable public debt, a country cannot grow. He admitted austerity’s short-term impact on economic growth can be a problem. But he said that could be addressed in part by choosing the right mix of austerity policies.

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