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Italy is confident of soon joining a “small group of virtuous countries” that have met Europe’s budget targets and is committed to remaining within the limit, according to Fabrizio Saccomanni, finance minister in the new coalition government.

Exiting the European Commission’s “excessive deficit procedure” next month would contribute to lowering the cost of borrowing for the government and private sector, Mr Saccomanni said on Thursday, while freeing up €12bn in regional investment spending co-financed by Europe.

Mr Saccomanni and Enrico Letta, coalition prime minister who took office last Sunday, have stressed their commitment to keeping Italy within the 3 per cent budget deficit limit this year, even while promising to cancel tax increases imposed by Mario Monti’s previous technocrat government.

Mr Letta told reporters that the government had not yet decided how it would finance the cancellation of a housing tax payment in June and a planned rise in value added tax, which would have raised about €4bn in revenues this year.

The unprecedented left-right coalition – a forced marriage after two months of political deadlock – is presenting itself as a post-austerity government with growth and job creation its main priorities. But with the economy still contracting, costs of social welfare are rising while tax revenues are falling, meaning that Mr Saccomanni must consider spending cuts and assets sales to meet Europe’s deficit target.

Even before Mr Letta announced tax cuts on Monday, doubts were being raised over the achievability of the 2.9 per cent budget deficit for this year that Mr Monti had set in his last weeks of office.

In its survey of Italy released on Thursday, the OECD forecast Rome would miss the deficit target set by Brussels in 2013 and next year unless further corrective measures were taken, because of a deeper than expected recession.

Angel Gurria, secretary-general of the Paris-based OECD, said it was fundamental for Italy to exit the excessive deficit procedure. “You have to get out of the hospital . . . Once you do that, then you are able to have an open and equal conversation with the EU and other EU members and it is an opportunity,” he told reporters in Rome.

Olli Rehn, the European Commission’s economic chief, is expected to rule on countries in breach of the deficit targets on May 29. Most violators are expected to be given more time to avoid financial sanctions, including France, Spain and the Netherlands. If Italy were allowed out of “hospital” then it would join only five other “virtuous” countries out of the eurozone 17 – Germany, Finland, Luxembourg, Malta and Estonia.

While Italy’s deficit is under control, its public debt is not. The OECD forecasts the debt-to-GDP ratio will rise from 127 per cent last year to 131.5 per cent in 2013 and 134.2 per cent in 2014 – considerably above the forecasts of Mr Monti’s former government.

Noting that Italy’s real GDP growth per capita was the weakest of all 34 OECD countries, the OECD survey urged “full implementation of structural reform legislation and commitment to debt reduction policies”. Mr Letta’s new government has not yet revealed its thinking on either issue.

“What Italy needs now are clear political choices that identify a long-term vision,” said Vincenzo Atella, director of the Centre for Economic and International Studies at Rome’s Tor Vergata university.

“It is not possible anymore to play by ear, finding patched up solutions in critical moments. The last time Italy made a long-term decision with clear political implications was in 1992, when it signed the Maastricht treaty.”

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