The European Commission predicts Italy will fail to meet its debt-reduction goal this year and sees the country’s economy growing less than PM Matteo Renzi’s government estimates.
Italy’s debt ratio will remain at 132.7 percent of gross domestic product in 2016, the same level as last year, the European Union’s executive branch said on Tuesday in its spring economic forecasts. The government last month predicted the debt ratio would fall to 132.4 percent this year. Italy’s debt-to-GDP ratio is the second-highest in the euro area after Greece.
In April, Finance Minister Pier Carlo Padoan said the reduction planned for this year “remains a top-priority goal for the government and is key to maintain market confidence.”
The EU also sees the Italian economy expanding 1.1 percent this year, less than the government forecast of 1.2 percent and slower than the commission’s winter forecast of 1.4 percent.
The country’s deficit for this year is expected to be at 2.4 percent of GDP, the commission said, wider than the 2.3 percent planned by the government.
“The high public debt and high private debt in some quarters of the euro area is still a drag on growth, and after all it’s about creating jobs, it’s about creating growth,” German Bundesbank President Jens Weidmann said last week in an interview with la Repubblica newspaper during a visit to Rome. “I don’t think you can build sustainable growth on a pile of debt.”
Still, the EC painted a generally positive outlook for the country. “The recovery of the Italian economy is projected to continue in 2016 and 2017 as domestic demand growth picks up” the commission said.