Italy needs to adopt further reforms and fully apply existing ones in order to boost its economy and improve public finances, the Organization for Economic Cooperation and Development (OECD) said on Monday.

According to Italian news agency ANSA, in its latest economic survey of Italy which was presented in Rome, OECD said Italy was enjoying an economic recovery thanks to the cyclical upswing in Europe, as well as significant improvements for exports and labor market productivity.

However, Italy continues to be plagued by low total factor productivity (TFP) and its high public debt, which threatens its fiscal sustainability, the OECD said.

Productivity has been hindered in Italy, the OECD observed, by competition-restraining regulatory polices. And although the Italian government has recently moved to deregulate several areas of the economy, it needs to push this liberalization further in order to strengthen market forces.

According to the OECD, Italy needs less intervention by the government in the business sector, lower local restrictions on retail trade, to simplify licensing requirements in professional services, reduce the influence of professional associations and encourage greater competition in retail banking.

By doing this, the OECD added, competition will be fueled and this will put a downward pressure on prices and produce consumer-friendly results.

In order to achieve fiscal sustainability, the OECD said, Italy must maintain its current fiscal policy in order to reduce its public debt, which is over 100 percent of GDP.

In its economic outlook, the OECD predicted that Italy's GDP this year should rise at close to last year's rate of 1.9 percent, the deficit will run at 2.5 percent of GDP this year and in 2008, while the primary surplus will climb to 2.2 percent of GDP in 2007and level out at 2 percent next year, unless further reforms are adopted.