Italy approves emergency deficit cuts, says growth to stay weak

Rome: Italy on Tuesday approved emergency deficit cuts for this year, as promised to the European Commission, and said the economy would continue to grow only modestly this year and next.
The extra deficit cuts for 2017 amount to 3.4 billion euros ($3.61 billion), or 0.2 per cent of gross domestic product, Prime Minister Paolo Gentiloni told reporters after a cabinet meeting.
The government marginally raised this year's forecast for economic growth to 1.1 per cent from 1.0 per cent previously, but lowered next year's outlook to 1.0 per cent from 1.3 per cent and projected the same 1.0 per cent rate in 2019.
Italy, consistently among the most sluggish economies in the euro zone, grew by 0.9 per cent last year and 0.8 per cent in 2015.
As a result of the emergency cuts, the budget deficit target for this year was lowered to 2.1 per cent of GDP from 2.3 per cent, while next year's was confirmed at 1.2 per cent.
Economy Minister Pier Carlo Padoan said the uptick in growth expected for this year was due to an anticipated increase in public and private investments, while the reduction next year was due to the more restrictive fiscal stance adopted.
"We are giving a strong reassurance that our accounts are in order," said Gentiloni, a former foreign minister who replaced Matteo Renzi as premier in December when Renzi stepped down after losing a referendum on proposed constitutional reforms.
"We are following the path of reforms and growth," he added.
Italy has the highest public debt in the euro zone after Greece, and has been in a tussle with the European Commission since it presented a 2017 budget last September which softened previous commitments on deficit and debt reduction.
Rome finally agreed to find 3.4 billion euros of additional cuts this year to meet the Commission's requirements.
Gentiloni gave no details of the measures in the mini-budget, saying only that the cabinet had avoided raising taxes and that some money would come from measures to curb tax evasion.
More information would be made available in the next few days, he said, suggesting more work may be needed to iron out differences in the fractious coalition backing his government.
The new economic forecasts in the Treasury's Economic and Financial Document (DEF) see the public debt, which hit a record high of 132.6 per cent of GDP in 2016, virtually stable this year at 132.5 per cent before easing to 131.0 per cent in 2018.
The government rowed back on a previous commitment to sell state assets worth 0.5 per cent of GDP this year, saying it would now manage to garner revenue of just 0.3 per cent. Resistance to selling state assets has grown among the ruling parties ahead of elections due in early 2018.
Padoan said the Treasury was working on "original" methods to meet the new, more modest goal.
The Treasury could sell off stakes in public companies to state lender Cassa Depositi e Prestiti (CDP), a source close to the matter told Reuters earlier on Tuesday.