Tommaso Padoa-Schioppa, Italy’s finance minister, on Tuesday will tell his eurozone counterparts that Rome’s new centre-left government is already acting to control public expenditure, cut the budget deficit and meet fiscal commitments to the European Union.
”The message is that we are absolutely determined to be fully compliant with the requirements of the [EU’s] stability and growth pact,” Mr Padoa-Schioppa told the Financial Times. “We have taken measures last week, the aim of which is to extract the maximum amount of fiscal discipline from the 2006 budget.”
Mr Padoa-Schioppa will outline the state of Italy’s public finances to eurozone finance ministers in Luxembourg tonight and EU finance ministers on Wednesday.
Italy’s former centre-right government had committed the country to cutting its deficit to less than 3 per cent of gross domestic product by the end of next year. Last year’s deficit was officially estimated at 4.1 per cent, and the new government led by Romano Prodi, prime minister, says Italy’s public finances are in worse shape than was feared before the election.
As a result, the government may soon introduce an emergency mini-budget to control spending. It may also consider asking the European Commission for a year’s extra grace in reaching the deficit target.
Mr Padoa-Schioppa said no decisions would be made until the government and its European partners had discussed an expert assessment of the public fin-ances. The finance minister, a non-party technocrat and former executive board member of the European Central Bank, has told colleagues they have no choice but to follow a rigorous course of spending discipline.
Asked if deficit-cutting measures risked throttling a mild economic recovery in the past six months, he said: ““We are in the process of a recovery. It’s the best moment to take action.”
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