Italy Debt Rises To E2.2814 Trln in June; State Revs Drop: BOI

By Silvia Marchetti

     ROME (MNI) - The Bank of Italy said Friday that the country's public debt

climbed to a peak of E2.2814 trillion in June, with state revenues in the first

half of the year 5.8% lower than in 2016.

     In a regular monthly statistical report, the Italian central bank confirmed

the upward trend in public debt, now standing among the highest levels since

2015. However, the pace of gains appears to be decelerating: June debt

registered a monthly increase of just E2.2 billion compared to more significant

recent spikes. 

     Despite Rome's plans to tighten public finances, Europe's third-largest

economy continues to be stifled by soaring debt, the second-largest in volume

after Greece. 

     Several monthly falls in debt last year lifted hopes that pressure on

Italy's public finances was finally easing, but 2016 ended with a fresh rise in

debt to 132.6% of GDP.

     Italy is under the scrutiny of the European Commission for its outstanding

public debt due to potential stability risks linked to an "excessive  economic

imbalance", which would lead to a deviation from fiscal targets and possible

fines. 

     In February, Brussels requested Rome to implement additional fiscal

measures to avoid sanctioning. To meet the EC's requirements, in April an

emergency law was passed by Italy's cabinet to curb structural deficit by E3.4

billion (0.2% of GDP), thus revising this year's net borrowing target down from

a previous 2.3% to 2.1% of GDP.

     Following Brussels' warning Rome has also revised its previously set debt

targets. According to updated government forecasts debt will fall to 132.5% of

GDP by end of this year from a previous estimate of 132.7%. 

     However, the medium-term objective of a structural balance as envisaged by

the new fiscal compact's debt rule will be fully achieved only in 2020, when

debt is expected to fall to 123.7%. 

     On June 1, Italy's Finance Minister Pier Carlo Padoan reassured the

European commission that Rome's government will further tighten public finances

by adjusting the structural balance by 0.3 percent of GDP in 2018. 

     The Commission has however acknowledged Rome's efforts in balancing growth

targets and fiscal sustainability. The EC has said it will take into account

reform and budgetary efforts when assessing Rome's 2018 budget plan in autumn.

     According to the BOI report, the June increase in debt was driven by an

E8.4 billion government borrowing requirement that was "partly compensated" by

an E6.3 billion monthly drop in the Treasury's liquid assets, currently at E52.6

billion, down from E92.5 billion in June 2016. 

     In June, monthly state revenues stood at E31.6 billion. In the first half

of this year total revenues amounted to E186 billion, registering a 5.8% annual

drop.  The "worsening" is primarily due to an extension in several tax payment

deadlines, said the central bank. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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