Debt Looms over Revival Plan for Italy

Prime minister's pledge to settle all existing arrears draws praise, but 132.6 percent debt-to-GDP ratio remains cause for concern.

Lurking within Matteo Renzi’s plan to cut Italian taxes and pay state suppliers are dangers the largesse will hamper efforts to trim the 2.09 trillion-euro (US$2.9 trillion) public debt.

Italy’s newly installed prime minister won applause from labor unions with his March 12 blueprint to trim 10 billion euros from lower-income workers’ tax bills and a sigh of relief from commercial businesses promised 68 billion euros in arrears payments from the government.

“Recognized debt will inevitably rise,” Bassanini said. Still, the alternative “would be not to repay the arrears, which would require the state to declare a default.”

The Italian public administration took an average 170 days last year to pay its debts, a report by artisans lobby Confartigianato showed earlier this year. That is almost three times the Eureopean Union average of 61 days, the report also said.

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