Italian Prime Minister Mario Monti’s 2012 budget, which more than doubles the government’s economic-contraction forecast, is “in line” with European Commission estimates, commission spokesman Olivier Bailly said.
Monti’s revised three-year economic plan, presented yesterday, forecasts the economy will shrink 1.2 percent this year, up from 0.5 percent projected in December. The prime minister also pushed back his balanced-budget goal amid a deepening recession, six weeks after Spain helped reignite Europe’s debt crisis by abandoning its own deficit target.
“The revised government projection for the Italian economy for 2012 is in line with commission interim forecast published last February,” Bailly told reporters in Brussels today. “The commission foresaw a contraction of 1.3 percent. We believe that the two analyses are on the same line.”
The Italian government now expects a deficit equivalent to 0.5 percent of gross domestic product in 2013, up from the previous forecast of 0.1 percent.
“The new budgetary targets presented by the Italian government appear consistent with the revised economic background,” Bailly said.
“The full and consistent implementation of the fiscal measures already adopted in Italy will allow this country to attain a sizeable primary surplus in 2013, which is the political objective that Mr. Monti set for his own country,” he said.
Looking beyond 2013, Bailly said it will be “essential” for Italy to main “sound public finances.” The government must also address long-standing structural weaknesses and boost economic growth, he said.
“The next crucial step for us is the adoption by the parliament of the long-awaited reform of the labor market, which is key to increase both employment and competitiveness,” Bailly said.