Italy failing to get its financial house in order

A group of 19 economists, who work at leading Italian universities and act as independent monitors of the nation's public finances, have been reported by the Financial Times as saying that the measures designed to cut Italy's budget deficit are mainly one-off measures which would have little impact in 2005.

Research published on the website www.lavoce.info concludes that "the 2.6bn euro worth of ministerial spending cuts planned for this year would fall in value to 980m euro in 2005. Spending on economically depressed areas and on incentives to business, due to be cut by 1.25bn euro this year, would actually go up by 600m euro in 2005".

The research sits ill with Prime Minister Silvio Berlusconi's comments in the Italian senate, reported in Corriere della Sera on 14 July, that "the country's accounts are under control". In his provisional capacity as Italy's Finance Minister, Berlusconi had presented the deficit-cutting plans to EU finance ministers and obtained their approval. Italy thereby escaped the threat of a formal warning from the Commission.

The PM said this vote of confidence from the EU demonstrated the credibility of the measures and added that "the reliability of Italian debt was confirmed by Moody's ratings whilst Standard & Poor's judgement was 'excessive'".