Renzi says no secret talks with EU

(ANSA) - Rome, August 18 - The Italian government is not holding "secret" negotiations with the European Union over the country's debt levels, despite the country's return to recession, sources in the office of Premier Matteo Renzi said Monday. Italy will heed its obligations on meeting deficit and debt levels as set out by the EU without increased taxes, the sources added.
    La Repubblica newspaper on Monday reported that Renzi was talking with the EU about finding "flexibility" on Italy's debt and deficit as part of a "grand bargain" with Brussels.
    The comments came amid new data suggesting Italians are struggling to make ends meet, including a record number seeking approval to pay taxes in installments.
    Equalitalia, the national tax collection agency, said Monday that 156,000 new requests were made in July for such permission - a new record that consumer groups said fits with other data showing the struggle facing Italians as the country slides back into recession.
    Equalitalia also noted that 2.4 million accounts with a total value of 26.6 billion euros are now on active installment payment plans for their taxes, about two-thirds of those individuals and the rest companies.
    Recent data showed the Italian economy returned to recession in the first half of this year, its third in five years, which has raised concerns about the ability of the Renzi government to meet its budget obligations.
    Those include a requirement by the European Union that member states maintain a ratio of deficits to gross domestic product (GDP) of under 3%.
    Renzi has insisted that Italy will not break the EU limits, even though his government's budget calculations have been hit by the economic slide back into recession.
    Indeed, Renzi has said Italy's deficit-to-GDP ratio for 2014 will be 2.9%, above the government's target of 2.6% but below the 3% threshold allowed by the EU. Economic problems are not unique to Italy but have hit many parts of Europe, said Renzi's office.
    That was demonstrated last Thursday by data which showed that eurozone growth was flat in the second quarter.
    In fact, Germany's gross domestic product (GDP) actually fell 0.2% in the second quarter compared with the first three months of the year, while France's economy was stagnant.
    Renzi said at the time that those European economic figures vindicated his campaign for the EU to focus more on promoting growth and job creation after years of painful austerity.
    However, it is inevitable that growth in the Italian economy will be "well below" the 0.8% previously forecast by the government for 2014, said Economy Minister Pier Carlo Padoan.
    In an interview broadcast in English on BBC radio, Padoan would not say what the government's new estimate will be for GDP growth, since the previous forecast of 0.8% growth is now out of date.
    He also defended the Renzi government's reforms put in place since the Democratic Party (PD) leader took power in February.
    Padoan urged patience in allowing time for the reforms, including tax breaks such as an 80-euro monthly bonus for low-income Italians, to kick in.
    Weak GDP "is long-term problem and it will take two years to see the effect" of reforms, Padoan said in the Sunday interview on BBC.
    But Italian families and the economy need help very quickly, with policies that will leave more cash in household wallets for spending that will, in turn, boost the economy, said consumer groups Federconsumi and Adusbef.
    "It is urgent and necessary that the government shows a serious and dedicated commitment to escaping from this situation, by giving the highest priority to recovery of market demand to restart the entire economic system," the consumer groups said.