Italian official budget deficit leaps to 9.3pc of GDP
MILAN — The Italian public deficit jumped to 9.3 per cent of output in the first quarter of the year, the highest level for at least 10 years, official data showed yesterday. The ratio of the overall public deficit to gross domestic product is the highest since the series of statistics began in 1999, the official statistics institute Istat said.

In the same period of last year, the deficit was 5.7 per cent of output. In the first quarter of this year, revenues for the state fell on a 12-month comparison, owing to the economic crisis, and public spending increased. The primary deficit, overspending excluding the added burden of interest payments on past deficits, was 4.6 per cent of output in the quarter from 0.8 per cent 12 months earlier. Istat noted that these figures were unadjusted and therefore subject to big changes from one quarter to the next.

The figures were not exactly the same as those notified to the European Commission because they did not include so-called swap operations involving financial instruments. The government forecast that for the whole of this year it will show a public deficit of 4.6 per cent of gross domestic product after 2.7 per cent last year. It expected the figures in 2010 to show a deficit of 4.6 per cent, and then 4.3 per cent in 2011.

It expected the debt, comprising accumulated past annual deficits, to rise to 113 per cent of GDP this year, to 117.1 per cent in 2010 and 118.3 per cent in 2011. The government has increased spending to combat the effects of the crisis but has not launched a massive stimulus plan because the huge debt limits its room for manoeuvre. Consequently it has tried largely to increase spending in some areas by re-directing expenditure from other sectors of the economy.

The government was also expected to announce some form of amnesty for people who have money abroad and are illegally avoiding taxes, on payment of a fine, as a means of obtaining revenue and increasing resources in the economy. EU rules require a country to contain its public deficit within 3 per cent of output to move towards a surplus in times of growth, and to target a maximum debt of 60 per cent of output.                                                                                                                                                                                                                           — AFP