Central bank calls for lower spending to meet deficit goals
Strict budget controls needed in final months of this year29 October, 13:17
In an economic statement, the central bank warned that spending should be trimmed by 0.1% of GDP while "strict control" of government costs are also necessary in the final months of this year.
The central bank also noted that Italian labour and income taxes are high by international standards.
Yet the government has very limited fiscal room to make significant reductions, added the bank.
In its most recent budget bill, introduced earlier this month, the government of Premier Enrico Letta was criticized for not cutting labour and income taxes deeply enough to satisfy critics who were calling for higher take-home pay and stronger job creation. The government has acknowledged it had been on course to finish the year with a 3.1% deficit but says the latest budget bill is designed to correct that.
But at the same time, Letta is struggling to keep Italy's budget deficit at or below the 3% target established by the European Union.
Exceeding the target, as Italy has done in the past, triggers expensive sanctions.
The report came as new statistics showed that Italy is set to post negative growth again for the third quarter.
However, statistical agency Istat added that forecasts the country will pull out of its longest recession in over two decades by the end of 2013 should be proved correct. Istat forecast Italy's GDP will fall 1.8% this year, just above the government's forecast of 1.7%.
Separately, the central bank released its monthly "euro-coin" assessment, which provides a kind of index measuring the economic situation across the eurozone and showed a gain of 0.20 after a gain of 0.12 in September.
It showed the second monthly increase in a row, reversing a negative trend of several months.
The bank said the indicator reflected an improvement in industrial production and in foreign trade.