Italy establishes lower budget deficit targets
Italy establishes lower budget deficit targets
ROME: Italy's government set its budget deficit targets for 2020 and 2021 at lower levels than previously expected, after the government's initial plans had baffled financial markets and European authorities.
On Wednesday, the government said it aimed at a budget deficit of 2.1% of gross domestic product for 2020 and 1.8% of GDP for the following year. The government had initially planned to aim for a deficit of 2.4% for both years.
He added that it will remain in a deficit of 2.4% for next year, three times what the previous government had planned.
With these lower targets, the government seems to have taken a more pragmatic stance after investors sold Italian assets after news that the government plans to expand the deficit and keep it at 2.4% of GDP for the next three years.
Even so, it must obtain the approval of the European authorities to maintain the deficit level of 2019, which the government says it needs to begin implementing its electoral promises and rekindle economic growth.
"Our goal is to have public investments as the main tool to work on growth," Economy Minister Giovanni Tria said.
Italian markets have fallen since Friday after the government significantly expanded its budget deficit target for next year, establishing a probable clash with the European Union, given the proximity to the 3% limit of the bloc.
Italian banks, which hold billions of government bonds, have also been hit in markets, but on Wednesday they had a rebound amid earlier indications that the budget deficit would be reduced after next year.
The government, supported by the populist 5-Star Movement and the League party, came to power in June promising to fight against eurozone restrictions, which limits the ability of member countries to have large deficits, as they could undermine the economic stability of the common currency. zone.
The coalition pledged to reduce taxes and increase spending on social assistance to help the poor and unemployed.
But such generosity clashes with the reality of the country's fragile finances. Italy's debt, which is just over 130% of gross domestic product, is the second largest after that of Greece.
The government says it plans to increase spending to stimulate economic growth and reduce debt to 126.5% of GDP by 2021.
However, it did not provide other key details, such as its economic growth targets for the next three years.
The full budget will be released in October and will be examined by the European Commission, which could reject it. The Italian parliament will have until the end of the year to approve it.
Write to Giovanni Legorano in giovanni.legorano@wsj.com
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