European Union finance ministers will warn Italy to reduce spending to prevent the budget deficit from breaking EU rules in 2008 after meeting the criteria for the first time in five years.
Italy, the euro region's third-largest economy, will likely reduce its deficit as a percentage of GDP to below 3% this year for the first time since 2002, according to a draft report to be approved tomorrow by finance ministers meeting in Brussels. Still, the overall debt, which rose for a second time last year, will continue to swell without reductions in spending on health care and pensions, it said.
In Italy, „risks to public finances in the medium term cannot be excluded, in particular stemming from the repeated overruns in health-care expenditure,” according to the document, which also said planned pension reforms must be fully implemented to curb the debt. The report also criticized a lack of details on the government's planned spending after 2007.
EU finance ministers tomorrow will also push Germany to deepen its efforts to cut spending next year and further reduce its budget deficit, according to a separate draft report. Germany, Europe's largest economy, last year met EU budget rules for the first time since 2001, as the fastest economic growth in six years boosted government revenue.
The ministers will also urge France to trim its deficit more in 2007 to improve its chance to meet its goal to balance its budget and push its debt below 60% of GDP in 2010. (Bloomberg)