Italy hales EU move for greater budget flexibility

'We did it!' tweets Premier Letta

Italy hales EU move for greater budget flexibility

(By Christopher Livesay) Rome, July 3 - Italian Premier Enrico Letta was jubilant on Wednesday following the European Commission's decision to allow more budget flexibility for countries like Italy keeping the deficit below the European Union's ceiling of 3% of GDP in order to boost growth. "We did it!" he posted on Twitter, followed shortly thereafter by an official statement from his office: "The President of the European Commission (Jose Manuel) Barroso has just announced in Strasbourg that countries out of an excessive-deficit procedure, like Italy, will be given more flexibility in the 2014 budget for investments in production and to relaunch growth. "This is the prize for the investment this government has made since the beginning to respect public finance targets". Letta, who was sworn in on April 28 at the helm of a broad left-right coalition government, has vowed to boost growth while maintaining the deficit below the EU's ceiling as the country, the eurozone's third-biggest economy, is struggling with its longest recession in over two decades. On Wednesday Barroso announced that the Commission will allow "temporary deviations" from midterm budget targets to enable public investments co-financed by the EU. "When assessing the national budgets for 2014 and the budgetary outcomes for 2013, we will again, in full respect of the Stability and Growth Pact, consider allowing temporary deviations from the structural deficit path towards the medium-term objectives set in the country-specific recommendations on a case-by-case basis," Barroso said in Strasbourg. "Such a deviation must be linked to national expenditure on projects co-funded by the EU under the Structural and Cohesion policy, Trans-European Networks or Connecting Europe Facility with a positive, direct and verifiable long-term budgetary effect". Italy is expected to contract 1.8% in 2013, according to the Organization for Economic Cooperation and Development. The country's declining growth has been linked to a massive round of austerity cuts brought about during the last administration of Mario Monti in order to curb Italy's skyrocketing borrowing costs amid the euro crisis. Rising unemployment was also an unintended consequence, with 12.2% of the workforce - over three million people - currently out of a job, the highest since the current method of evaluation began. For youth the situation is even more dire, with nearly 40% of those under 25 out of work. Giorgio Squinzi, the president of the industrialists' confederation Confindustria, said the EC decision was "good news". "I believe as a country, as Italians, with all the sacrifices we've made in this recent period, we amply deserve it," he added. Economy Minister Fabrizio Saccomanni seconded the sentiment, saying the added budget flexibility "rewards the work done over the last months and wipes away the skepticism of some". He added that Italy was on target to "balance its budget in structural terms" in 2013. A country is considered to have balanced its budget in structural terms if government revenues match expenditure when the data is adjusted to take account of fluctuations in the business cycle. "This is the most serious crisis since the end of World War II, but the first signs of stabilization are starting to appear," Saccomanni said. The economy minister stressed that efforts must continue if the country is to "achieve the reversal of recessionary trends in the second half of the year". Italy is expected to have a budget-deficit-to-GDP ratio of 2.9% in 2013.

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