The government finally admitted that it won’t be able to reach its ludicrously optimistic target of balancing the country’s budget by 2013
There were long overdue signs of realism from the Italian government this week, as it finally admitted that it won’t be able to reach its ludicrously optimistic target of balancing the country’s budget by 2013.
Six months ago, the finance ministry breezily announced they could hit the Berlusconi-imposed target, despite, in the very same breath, lowering its predictions of economic growth in 2012 from 1.3 per cent to 0.6 per cent. This was in September 2011, a week after the government unveiled a EUR 54.2 billion austerity plan aimed at balancing the country’s books by 2013: 'The austerity plan is amply sufficient to balance the budget in 2013,' it said.
How embarrassing. This week the Italian government, led by Prime Minister Mario Monti, has increased its contraction prediction for 2012 from 0.4 per cent to 1.2 per cent; on the back of this, it has reluctantly dragged its head out of the sand and revealed that the budget won’t be balanced next year. It insists, though, that it only needs until 2015 to hit that target.
The gloomy old International Monetary Fund, on the other hand, reckon that it won’t happen until 2018 – ‘too pessimistic’ according to Bank of Italy Deputy Governor Fabrizio Saccomanni.
Really? Standard and Poor’s lowered Italy’s credit rating in September last year, justifying it on the grounds that that a weak government was presiding over an economy with poor growth prospects. The country is now in full-blown recession and the finance ministry itself, in the same document containing its embarrassing admission about balancing the budget, says that Italy’s debt will rise from 120 per cent to 123.4 per cent of GDP in 2012. Hardly grounds for optimism.
When the Italian government stalls for yet more time in 2013, it will show the IMF’s prediction to be realistic rather than pessimistic.