Further deficit adjustment 'counterproductive' says govt in DEF report

(ANSA) - Rome, September 29 - The government believes a further adjustment to the structural deficit in 2017 would be "counterproductive," Premier Matteo Renzi and Economy Minister Pier Carlo Padoan said in a report to parliament Thursday. "An overall drop of 0.5 points in 2017-2018 already constitutes an extraordinary fiscal effort, which it is hoped our economy will be able to deal with more easily once the recovery becomes fully consolidated," the government said in a note attached to its revised economic and financial blueprint (DEF) underlying the next annual budget. The premier and the minister asked parliament to approve the revised DEF - in which growth forecasts came down and deficit estimates went up due to spending on the refugee crisis and on relief and reconstruction following a devastating August 24 earthquake in central Italy - while sticking to Italy's objective of a balanced budget by 2019.
   The Brexit will hit the Italian economy by between 0.5 and 1.0 of a percentage point of GDP in the 2016-2017 period, according to the revised version of the government's economic blueprint, the Economic and Financial Document (DEF).

It said Britain's exit from the European Union could hit the Italian economy in four main ways - by affecting the financial markets and Italian exports amid causing uncertainty the length and outcome of the negotiations; by unsettling companies investment decisions and expectations; by slowing consumer spending and by hitting the euro's exchange rate and Italy's borrowing costs.

Padoan said Thursday that the government's 2017 budget bill will feature "selective and targeted measures for growth". He told RAI radio that these would include productivity incentives made up of "tax breaks for bigger salaries for workers and more profits for companies. Italy's recovery is not as strong as hoped for and this week the government revised down its growth forecast for 2016 to 0.8% from 1.2%.