Italy follows Spain on missing deficit target

The International Monetary Fund (IMF) put out an even more pessimistic forecast about Italy's recession earlier on Tuesday, when it said the Italian economy would contract by 1.9 percent.

"We are a short-term government called on to make enduring changes," Monti said at a news conference on Wednesday.

"What we are doing is only the beginning of an operation that will last for many years, but that doesn’t mean there will be many years without growth. Everything, everything, everything that we are doing now goes in the direction of spurring growth."

Worse-than-expected recession figures have also pushed the Spanish government to ask EU institutions for a softer deficit target this year, as austerity measures deepen the economic slump. The EU agreed to a target of 5.3 percent, drawing criticism that its new mantra of fiscal discipline is hollow talk.

The IMF also on Tuesday warned that more cuts in Spain will make things worse.

"What we would not like ... is more fiscal consolidation," IMF chief economist Olivier Blanchard said at a press conference on its World Economic Outlook.

Madrid's borrowing costs have shot up to close to bail-out territory in recent weeks. Blanchard said said markets are "schizophrenic" on the austerity/growth debate, creating a "damned if you do, damned if you don't" situation for troubled euro-countries.

The IMF also said the European Central Bank (ECB) could help to spur growth in the region, by further easing interest rates and issuing cheap loans to banks.

The ECB has already injected €1 trillion worth of cheap loans into the eurozone banking system, a move which was tacitly approved by Germany because it does not require parliamentary approval.