Italy’s deficit to fall below 4pc in 2006-minister

LUXEMBOURG - Italian Economy Minister Tommaso Padoa-Schioppa said on Wednesday he expected the budget deficit to fall to below 4 percent of gross domestic product in 2006 after a package of extra deficit cutting measures.

By (Reuters)

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Published: Wed 7 Jun 2006, 10:50 PM

Last updated: Sat 4 Apr 2015, 3:22 PM

Italy said on Tuesday it would push through a mini-budget to rein in public finances as promised to the EU after an audit showed the deficit would rise more than expected this year.

Asked by reporters whether the 2006 deficit would fall below 4 percent of GDP after the new measures are passed, Padoa-Schioppa said: “I think so”. The deficit stood at 4.1 percent of GDP in 2005.

Padoa-Schioppa, speaking at a news conference after a meeting of EU finance ministers in Luxembourg, also said he hoped to have a mini-budget approved by the Italian parliament before the July 11 meeting of European Union finance ministers.

Italy has breached the bloc’s budget deficit ceiling of 3 percent of gross domestic product for the last three years and EU finance ministers have given Rome until the end of 2007 to bring its public finances back in line.

The audit of public finances, whose results were unvealed on Tuesday, showed the 2006 deficit-to-GDP ratio was heading towards at least 4.1 percent but could rise to 4.6 percent or more.

Public debt was seen rising for the second year running to 108.3 percent of GDP.

Padoa-Schioppa said Italy must return to a primary surplus of 3-3.5 percent of gross domestic product as soon as possible.

He said the government would propose measures to foster growth along with the mini-budget.

Rating agency Standard & Poor’s said in a statement on Wednesday that the new government’s commitment to tackle the deficit early in its term of office was “reassuring”.

However, it said structural measures were needed “to ensure the resumption of a clear, significant and sustainable downward trend of government debt as a percentage of GDP, which is essential to maintaining the sovereign ratings on Italy at the current level”.

S&P warned recently it could cut Italy’s ratings unless the government quickly set out a convincing strategy to cut the deficit and debt.

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