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Italy says it will promises on deficit reduction

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Italy says it will promises on deficit reduction

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Italian Prime Minister Romano Prodi and European Commission President Jose Manuel Barroso insisted that they did not discuss the Italian deficit during their talks in Brussels, but reporters still asked about that and got a brusque response from Prodi. He said: “We’re going to rigorously stick to the promises we made, as for the rest, my country’s economic policy is decided by my government. That’s all I’m going to say.”

The EU had expressed concern about the lack of progress, by particularly Italy and France, on deficit reduction. Barroso said: “I hope the public deficit will be firmly below the 3% this year, as is expected, so that the Commission can close the excessive deficit procedure. I am confident that President Prodi’s government will continue consolidating.” At that point Prodi intervened and said: “It is firmly and strongly below 3%.” To which Barroso responded: “Good news.”

Italy’s public debt – at 105% of GDP is the highest in the EU. The European Commissioner has predicted that Italy’s economic growth this year will be just 1.9% and that it will be 1.7% next year -the lowest in the region. The Italian government thinks GDP growth will be even less in 2008 at just 1.5%.

Italy’s economy minister has warned deeper deficit cuts next year risk making the economy “anorexic.”