Italy's budget deficit hit 6.1% of GDP in the first quarter, national statistics bureau Istat reported on Tuesday.
The bureau noted that in the first quarter of 2006, Italy posted a deficit of 5.9%. The figure fell over the course of the year and the final deficit for 2006 was 4.4%.
The 2006 deficit was the highest in ten years and meant that Italy had breached the EU's 3% deficit cap for four years running.
Straightening Italy's public accounts has been a priority for the one-year-old centre-left government, which has pledged to bring the deficit back below 3% this year and forced through an unpopular 34.7-billion-euro budget containing extensive tax hikes and spending cuts.
The government's latest forecasts, contained in a key four-year economic and budget planning document known as the DPEF, see the deficit dropping to 2.5% in 2007 and then to 2.2% in 2008.
As for Italy's debt mountain, which is the third biggest in the world, the DPEF said it would fall to 105.1% this year compared to 106.8% last year and would drop below 100% by 2010.
Istat underscored the high price the country was paying for its debt, saying that interest payments in the first quarter were 12.4% higher than for the same period last year and cost an additional 2 billion euros.
The bureau also said the primary surplus (state revenue not including net interest payments on the public debt) for the first three months of 2007 was -1.5%.
Turning to incoming funds, Istat highlighted a 2.9% rise over the same quarter in 2006 which it said was mainly due to a 6.35% jump in revenue from direct taxes and a 2.7% increase in revenue from indirect taxes.
After presenting the DPEF in draft version last week, Premier Romano Prodi and Economy Minister Tommaso Padoa-Schioppa said that a public accounts crisis allegedly left by the previous Silvio Berlusconi-led government was over.
But European Monetary Affairs Commissioner Joaquin Almunia subsequently criticised the government, saying the public accounts consolidation outlined in the DPEF was "limited" and inadequate.
Almunia stressed that the public debt "still remains much higher than 100% of GDP" and that Italy had paid out 68 billion in interest on it in 2006, amounting to 5% of GDP.
"This was twice the sum spent on public investments and prevents resources being used in a more productive way," the commissioner said.
"The slow reduction of the debt is also very negative for future generations," he added.
The commissioner also rapped the government for what he termed "persistent uncertainty" over pension reforms.
The issue was not dealt with in the DPEF after talks with trade unions broke down.
The government remained undaunted by the criticism.
Padoa-Schioppa said the government was focusing on "sustainable growth" while Cabinet Undersecretary Enrico Letta said: "The government will show Almunia that the public accounts are now in good shape".
