(ANSA) - Italy's public debt, which is already the third highest in the world, set a new record in June at 1,517.2 billion euros, a Bank of Italy report revealed here on Monday. The report said the debt rose by 25.2 billion euros over May.
Only last week the European Central Bank renewed its recommendations that Italy work harder at consolidating public accounts. In its monthly update on euro zone economies, the ECB said it was "essential" that Italy adopt a "credible reform strategy and structural measures" to improve its public finances. Italy's debt is the highest in the European Union.
The European Commission in June gave its green light to Italy's plan to cut its spending deficit to below 3% of GDP and reduce its debt by the end of 2007. The EU executive pointed out that Italy must produce enough of a primary surplus to cut the debt on a regular basis "while also focusing attention on those factors which do not involve net indebtedness."
Current predictions say that Italy's debt this year will run between 107% and 108% of GDP, compared to the recommended ceiling of 60% set by the euro zone's Stability and Growth Pact.
Last month, the American Standard & Poor's rating agency downgraded its outlook for Italy from 'stable' to 'negative' because of Italy's "mounting fiscal challenges". S&P expressed doubts about Italy's ability to meet its promise to bring its spending deficit and public debt back to acceptable levels by the end of 2007.
S&P criticised the government's lack of new strategies for structural reform in public spending and said this would "effectively perpetuate an inefficient spending structure which when compounded by weak growth, that the government places at 1.3% per year, will drive the debt ratio to a peak
of 110% of GDP in 2007."
The rating agency added that the government's "expectation of rapid structural budgetary improvements and projections of revenues of about 1% of GDP per year, raised through asset sales, appear optimistic.
"Consequently, the resulting officially targeted debt ratio of 101% of GDP by 2009 also seems difficult to achieve, with a ratio of 108% of GDP for that year looking more plausible."
