Italy’s budget deficit narrowed more than economists forecast last year as spending cuts and tax increases helped shore up public finances even with the economy slipping into a recession.
The shortfall fell to 3.9 percent of gross domestic product from 4.6 percent in 2010, Rome-based national statistics office Istat said today. The 2011 reading was less than the 4 percent median forecast of 6 economists surveyed by Bloomberg News. Economic growth last year slowed to 0.4 percent, topping a 0.3 percent forecast, from a revised 1.8 percent the previous year.
Italy entered its fourth recession since 2001 in the final three months of last year under the weight of austerity measures to fight the sovereign debt crisis. Prime Minister Mario Monti is implementing a 20 billion-euro ($26.6 billion) package of spending cuts and tax increases to eliminate the budget deficit next year and reduce the nation’s 1.9 trillion-euro debt. Those measures are weighing on growth, with the European Commission forecasting on Feb. 23 that the Italian economy will contract 1.3 percent this year.
Even with the recession deepening, the government has pledged to stick to the pledge to balance the budget in 2013. The government’s debt last year rose to 120.1 percent, the highest since 1996, from 118.7 percent in 2010, Istat said.
The governments led by Monti and his predecessor Silvio Berlusconi last year approved more than 81 billion euros in austerity measures to be implemented through 2014.
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