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'Outdated' deficit limits kept, but rise possible says Renzi

Tax cuts, spending may nudge 2.6% forecast higher

19 March, 16:06
'Outdated' deficit limits kept, but rise possible says Renzi (see previous) (ANSA) - Rome, March 19 - Premier Matteo Renzi on Wednesday vowed to honor the 3% limit on Italy's deficit-to-GDP ratio, but called the EU threshold "outdated", and said the country's deficit forecast for 2014 could rise. Speaking from the floor of the Lower House, Renzi said that tens of billions in combined income-tax cuts, infrastructure spending and debt repayments planned for this year could raise the 2014 deficit-to-GDP ratio forecast "from 2.6% to 3%".

Aiming to jolt the sclerotic economy out of a slow recovery from Italy's worst recession since World War II, Renzi plans to cut income taxes by 10 billion euros, invest 1.74 billion euros in social housing programs, spend 3.5 billion euros on schools and repay 68 billion euros in outstanding bills, among other things.

Recent reports said Renzi had planned to broach the sensitive issue of deficit limits when he met Monday with German Chancellor Angela Merkel at their first bilateral since he was sworn in as premier last month. At the meeting, Merkel praised Renzi's "ambitious" plans and expressed certainty in Italy's commitment to stay below the EU-enforced limit. Italy must be careful to avoid breaching it, as it did in 2009. The European Commission subsequently opened an excessive-deficit procedure against Italy, obliging it to divert public money into trying to reduce that ratio.

It was taken off the procedure last year after bringing the ratio below 3%.