Italy economy minister says growth outlook more difficult
ROME (Reuters) - Signs of weakening economic growth have created a more difficult environment for the Italian government but will not weaken its determination to continue structural reforms, Economy Minister Pier Carlo Padoan said on Thursday.
Prime Minister Matteo Renzi has ruled out extra budget tightening measures this year but Padoan's remarks underline a threat to the aim of keeping the budget deficit within the European Union's ceiling of 3 percent of gross domestic product.
"The most recent macroeconomic data, if confirmed, indicate a delay in the mechanisms for a return to sustained economic growth in Europe and elsewhere. That is true for our country as well," Padoan told parliament.
"The margins for government action in this case will be more restricted," he said but added that the need for decisive reform action remained unchanged.
EU leaders signalled at a June summit they were ready to give member states extra time to consolidate their budgets as long as they pressed economic reform. Leaders agreed to make "best use" of flexibility built into EU budget rules.
The Italian government's official growth forecast for the eurozone's third-largest economy in 2014 remains 0.8 percent after a contraction of 1.9 percent in 2013 and 2.4 percent in 2012.
However, that is well above estimates from other bodies, including official statistics agency ISTAT, which last month cut its GDP forecast to a range between a decline of 0.1 percent and a rise of 0.3 percent - a level which would make it extremely hard to cut a public debt expected to top 135 percent of GDP.
After Italy's economy went into an unexpected reverse in the first quarter of the year, contracting by 0.1 percent, the most recent industrial output data for May provided another unwelcome surprise last week, with its sharpest monthly drop since 2012.
Renzi has led calls for a more expansive interpretation of European budget rules but he has faced scepticism from some of Italy's partners who fear that slackening fiscal discipline will destabilise public finances without providing stronger growth.
(Reporting by James Mackenzie, editing by Isla Binnie and Ralph Boulton)
