Italy to seek some budget flexibility at EU summit: minister

Published March 11, 2013

| Reuters

Italy plans to ask its EU partners to agree to grant states that have nearly brought their budgets into balance more flexibility to increase deficits to finance public investment, European Affairs Minister Enzo Moavero said on Monday.

Italy expects to achieve a balanced budget in structural, or growth-adjusted terms in 2013, in line with targets agreed with its European Union partners in 2011.

In nominal terms, it recorded a deficit of 3 percent of gross domestic product last year, down from 3.8 percent in 2011 and just within the EU's maximum limit.

However with the economy in deep recession, there has been growing pressure following last month's inconclusive election for an easing in the austerity policies imposed to meet the target.

"The idea is for a limited degree of tolerance for those coming in between zero and 3 percent," Moavero told reporters on the sidelines of meetings to prepare for the European Council meeting on Thursday.

"In a situation like that, there could be room for a limited degree of tolerance for public spending that could end in a limited deficit for productive investment," he said.

There have been growing calls across the EU for measures to revive growth in Mediterranean countries including Italy that have been ravaged by the economic crisis.

However reaction from northern European countries including the bloc's paymaster Germany has been skeptical and Moavero said it was not sure that Italy's request would be granted by other member states.

Italy's economy, which contracted by 2.4 percent last year, is now in its longest recession for 20 years.

Although no party won enough votes in the election to form a government, the election last month showed a clear drop in public support for the austerity policies imposed by the outgoing government of Prime Minister Mario Monti.

All three of the biggest alliances - Pier Luigi Bersani's centre-left, Silvio Berlusconi's centre-right and the anti-establishment 5-Star Movement of former comic Beppe Grillo - have demanded more measures to stimulate growth.

(Reporting by Francesco Guarascio; writing by James Mackenzie; editing by Ron Askew)

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