EC boosts Italy deficit fight with new data

Infraction procedure likely to be stopped

EC boosts Italy deficit fight with new data

(By Denis Greenan). Rome, May 3 - The European Commission on Friday boosted Italy's deficit fight with new figures showing it would meet a key European Union-mandated target this year. Italy's budget deficit will be 2.9% in 2013, the EC forecast Friday, below the 3% limit set by EU treaties. It will drop to 2.4% in 2014, the EC said, making it likely that Italy will soon be cleared of busting deficit targets. The new forecast "facilitates" the closure of a deficit-infraction procedure but the Commission still needs to see the details of the new government's deficit-curbing measures, the EC said. Brussels expects Economy Minister Fabrizio Saccomanni to present that plan "in the next few weeks" so the issue can be resolved at a June 27-28 summit. Italy's bloated national debt is expected to exceed the 130% threshold to reach 131.4% in 2013 and 132.2% in 2014, the EC added. The EC previously forecast Italian sovereign debt reaching 128% in 2013 and 127% in 2014. European Economic and Monetary Affairs Commissioner Olli Rehn warned that Italy's sovereign debt is so high the country must work on bringing accounts under control even after any deficit reduction. Rehn said Italy needed to regain competitiveness and economic growth. Italian Premier Enrico Letta has said his unprecedented right-left government is racing against time to cut Italy's "unbearable" tax burden and stoke growth while maintaining fiscal discipline. In talks with Organisation for Economic Cooperation and Development chief Angel Gurria in Rome Thursday, Letta also said Italy would help the EU fight "nightmarish" youth unemployment. He said Italy would abide by its deficit and debt-reduction commitments to the European Union after meeting EC President Jose' Manuel Barroso. Letta saw Barroso at the end of a European tour in which he called for the bloc to put as much emphasis on promoting growth as it has on fiscal consolidation so far during the eurozone crisis. New data this week showing unemployment at a record high of 12.1% or 19 million people out of work in the 17-nation eurozone offered frightening new figures on youth unemployment. One out of four under-25s was on the dole in the EU in March but almost two in three in Greece and Spain and nearly four out of 10 in Italy. Letta stressed that growth is not an alternative to "rigorous" budgetary consolidation. "I think there is a need, together with maintaining our commitments, for a strong policy promoting jobs and growth", Letta said. "I think this part needs to be implemented now: it is not an alternative to rigour". Letta again stressed the need "to make up for the time lost" between elections at the end of February and the formation of the government which was sworn in on Sunday. On the thorny issue of property-tax IMU, the OECD risked irking ex-premier Silvio Berlusconi's People of Freedom (PdL) party by saying that scrapping it should not be a priority for the new government. The PdL is threatening to pull its support from Letta's executive and sink it unless the widely despised tax is abolished. Berlusconi also wants the 2012 revenues collected from IMU returned to taxpayers to respect the key pledge he made in the run-up to February's general election. Letta, a member of the centre-left Democratic Party (PD) that had been in bitter combat with the PdL for two decades before the inconclusive election result forced them to form an unnatural alliance, has said that June's IMU payments would be suspended as part of a review of the tax. But he has not promised to abolish it completely.

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