World Economy

Italy Says Growth a Priority, Rejects Cut in Budget

Italy Says Growth a Priority, Rejects Cut in Budget Italy Says Growth a Priority, Rejects Cut in Budget

Italy would remain focused on boosting growth and is reluctant to take further measures to cut the country’s deficit as repeatedly required by the European Union, an Italian official has said.

“Brussels reminds us that Italy’s public debt is too high, and we are well aware of that,” Italian Economy Minister Pier Carlo Padoan told local media, Xinhua reported.

“Yet, I have repeatedly said the main road to cut the debt is growth: therefore, the growth is the government’s priority,” he said in the interview with national broadcaster RAI TV.

Padoan said the European Commission, the EU’s executive arm, was worried because the debt did not decrease in 2016 as expected, and as the government had promised.

“It has not fallen because we were in deflation in 2016, and market conditions did not allow us to complete the privatization plan,” the minister said.

The privatization program concerning public companies would continue in 2017, and the government expected a higher growth. “We will see if further measures to meet the (EU) targets will be necessary,” Padoan said.

Padoan’s remarks followed reports by La Repubblica daily, which suggested the European Commission was about to ask Italy to commit to further cuts worth €3.4 billion ($3.64 billion) to reduce its structural deficit.

In the 2017 budget, the Italian government put the deficit target at 2.3% of gross domestic product from a previous 1.8% estimated in May 2016.

The European Commission was expected to send a letter to Prime Minister Paolo Gentiloni’s government, asking for corrections of the public finances to be approved before Feb. 1, according to ANSA news agency.

Italy’s debt-to-GDP ratio reached 132.8% in 2016, from 132.3% in 2015, according to the Ministry’s update economic forecasts. It was the highest one in the eurozone after Greece’s. Padoan also said he was “a bit surprised” by the latest estimates of the International Monetary Fund on Italy’s economy.

In its updated World Economic Outlook, the IMF said Italy would grow 0.7% in 2017 and 0.8% in 2018, a decrease by 0.2 and 0.3% respectively compared to the previous forecast.

Italy was the only country in the G7 nations to be downgraded. The bad loans troubling the Italian banking sector, and a higher risk of political instability were the two main reasons behind the IMF’s decision to reduce Italy’s growth estimates.

“Regarding the banks, again I do not much agree with the IMF: the government has taken relevant measures to face some situations in the banking sector, which anyway are not worrisome,” Padoan said.


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