Italy pledges to cut deficit to EU limit

Italy’s government says it is committed to reducing the budget deficit to an EU limit this year even as it faces the hurdle of a deeper economic slump.

“It is key that this gap is quickly corrected,” said finance minister Fabrizio Saccomanni as he presented new forecasts, including a deficit of 3.1% of output for 2013. “We need to give the impression that it’s only a slight deviation and that 3% is our target.”

Prime minister Enrico Letta is under pressure to maintain the budget discipline required by the EU at the same time as former premier Silvio Berlusconi’s party is pushing for tax relief for firms and consumers.

The cabinet revised its budget plan yesterday and said the economy will shrink 1.7% this year, more than the 1.3% forecast. A slower recovery in 2014, with growth of 1% is also envisaged. The government expects public debt to rise to 133% of GDP this year and remain around that in 2014.

It is targeting a deficit of 2.5% of GDP next year.