Tremonti Talks Budget Prudence As Italian Fiscal Deficit Rises

by Ulrika Lomas, Tax-News.com, Brussels

07 October 2009

Italy's Minister of the Economy, Giulio Tremonti, has said that the Italian government has adopted a strategy of fiscal prudence, given the current economic uncertainty and the increased deficit in public finances.

In recent evidence before the Senate on the 2010 budget bill (legge finanziaria per il 2010), he reiterated that the bill did not contain any additional tax policies and was merely a representation of the country’s public finances for the fiscal years from 2010 to 2013. The uncertainties of economic trends, he said, called for great prudence to avoid tax measures which, in future years, could produce economic effects in the future contrary to those then required.

The government, he continued, was convinced that fiscal stability was what was required for a recovery in economic growth. Any further measures would await the agreement of an “exit strategy” from the current economic situation at a European level. He added that, in the meantime, any unexpected addition to tax revenues (for example, from the present tax amnesty) would be allocated towards the most urgent public spending needs at the time.

With regard to Italy’s public sector deficit, he was of the opinion that any deterioration in the ratio between the deficit and the country’s GDP was due more to the reduction in latter, rather than the increase in public debt (which had shown the least cumulative increase of the G7 countries). However, he said that a ratio between the deficit and GDP above the threshold of 5% was not welcome.

In fact, in the first six months of this year, it was announced that ratio had reached 6.3%, greater than the 3.5% seen in the first half of 2008, but substantially less than the 9.3% that had been calculated in the first quarter of 2009. In the first half of 2009, total tax collections reduced by 2.4%, compared to a fall of only 0.5% in the same period of 2008, and reached 45.8% of GDP, as against 45% in 2008.

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