Nov. 11 (Bloomberg) -- The European Union told Italy to bring its budget deficit within the EU limit a year sooner than most of its European partners because of a rising debt and high financing costs.

The EU Commission called on the government to cut the deficit to below the limit of 3 percent of gross domestic product by the end of 2012, after a review of the shortfalls of 14 EU countries. Most others were given until 2013, while Belgium was told to stick to 2012 because of its debt and Greece was singled out for possible disciplinary action.

“The comparatively limited size of the deficit and the existence of high-debt ratios calls for an earlier deadline of 2012,” for Italy, the Brussels-based executive said today in a press release.

Italy’s deficit will climb to 5.3 percent of gross domestic product this year as Europe’s fourth-biggest economy contracts 4.7 percent, the commission said. The EU forecasts that Italy’s debt, Europe’s largest, will rise to 114.5 percent of GDP this year, increasing the amount the government must pay to service that borrowing.

The EU called on Italy to cut the deficit by 0.5 percentage point a year. That is in line with the government’s own deficit- reduction pledge contained in its three-year financial plan.

Minimal Dosage

“Everyone will have to take the medicine,” Finance Minister Giulio Tremonti told reporters in Brussels yesterday. “We must be the first to take it, but the dosage can be minimal.” The ministry’s director general, Vittorio Grilli, said yesterday that cutting the deficit “won’t pose any further risks to our recovery.”

The worst recession since World War II has depleted Italy’s coffers, reducing the government’s room for measures to support the economy. Tax revenue fell by 6.6 billion euros ($9.9 billion) or 2.5 percent in the first nine months compared with the same period in 2008, the Finance Ministry said on Oct. 14.

“The EU has given us a heavy task, but easier than other European countries,” Undersecretary of Finance Giuseppe Vegas said in an interview in Rome. “Next year the recovery can begin and it will be easier to implement this request.”

-- With assistance from Flavia Rotondi in Rome. Editors: Jeffrey Donovan, Andrew Davis

To contact the reporter on this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

Last Updated: November 11, 2009 08:17 EST