Sunday

20th Aug 2017

Italy follows Spain on missing deficit target

  • Rome: The Italian government has admitted it will not be able to balance its budget by next year (Photo: Giampaolo Macorig)

Italian Prime Minister Mario Monti followed in the footsteps of his Spanish counterpart on Wednesday (18 April) by announcing that Italy would need extra time to reaching its deficit target amid a deepening recession.

The Italian government had pledged to balance its budget in 2013, but it now expects the economy to shrink by 1.2 percent of GDP this year, the cabinet said in a statement. It added that the deficit of 0.1 percent previously estimated for 2013 would not be reached until 2014, while a balanced budget would be reached only in 2015.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The International Monetary Fund (IMF) put out an even more pessimistic forecast about Italy's recession earlier on Tuesday, when it said the Italian economy would contract by 1.9 percent.

"We are a short-term government called on to make enduring changes," Monti said at a news conference on Wednesday.

"What we are doing is only the beginning of an operation that will last for many years, but that doesn’t mean there will be many years without growth. Everything, everything, everything that we are doing now goes in the direction of spurring growth."

Worse-than-expected recession figures have also pushed the Spanish government to ask EU institutions for a softer deficit target this year, as austerity measures deepen the economic slump. The EU agreed to a target of 5.3 percent, drawing criticism that its new mantra of fiscal discipline is hollow talk.

The IMF also on Tuesday warned that more cuts in Spain will make things worse.

"What we would not like ... is more fiscal consolidation," IMF chief economist Olivier Blanchard said at a press conference on its World Economic Outlook.

Madrid's borrowing costs have shot up to close to bail-out territory in recent weeks. Blanchard said said markets are "schizophrenic" on the austerity/growth debate, creating a "damned if you do, damned if you don't" situation for troubled euro-countries.

The IMF also said the European Central Bank (ECB) could help to spur growth in the region, by further easing interest rates and issuing cheap loans to banks.

The ECB has already injected €1 trillion worth of cheap loans into the eurozone banking system, a move which was tacitly approved by Germany because it does not require parliamentary approval.

IMF: eurozone at centre of coming storm

IMF chief Lagarde has warned of "dark clouds" on the economic horizon, adding that bail-out funds should be used to help banks to stop a credit crunch.

Germany's free borrowing is 'destroying Europe'

European Parliament chief Martin Schulz has launched a scathing attack on the German chancellor for promoting policies he says drive the borrowing costs of other euro-countries up, while Germany has just hit a record zero-percent interest rate on its bonds.

Spanish and Italian borrowing costs soar

The cost of insurance against a Spanish default reached another record on Monday, with Italy's borrowing costs also rising sharply amid market fears about the eurozone.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Macedonia sacks top prosecutor over wiretap scandal
  2. ECB concerned stronger euro could derail economic recovery
  3. Mixed Irish reactions to post-Brexit border proposal
  4. European Union returns to 2 percent growth
  5. Russian power most feared in Europe
  6. Ireland continues to refuse €13 billion in back taxes from Apple
  7. UK unemployment lowest since 1975
  8. Europe facing 'explosive cocktail' in its backyard, report warns

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides