September 1, 2014 / 4:08 PM / 3 years ago

Italy may seek to delay structural budget target - official

ROME (Reuters) - Italy may seek to delay bringing its structural budget deficit into balance until 2016, a senior official said on Monday, as Prime Minister Matteo Renzi repeated that Rome would seek a flexible interpretation of European Union budget rules.

Italy's Prime Minister Matteo Renzi gestures during a news conference at Chigi palace in Rome September 1, 2014. REUTERS/ Max Rossi

Enrico Zanetti, undersecretary at the economy ministry, told Reuters that any change to budget targets would have to be agreed with EU partners but that delaying the structural budget target could open valuable breathing space next year.

Italy has been aiming bring to its budget close to balance in structural terms - or adjusted for the effects of the business cycle and one-off factors - by 2015 but a year’s delay could gain the government some 7-8 billion euros, Zanetti said.

“Of course considerations of this kind would only take shape if this were considered an appropriate path at European level,” he said.

Renzi insists Italy will respect its commitment to keep the headline budget deficit within the EU’s threshold of 3 percent of GDP but says he wants the rules interpreted broadly to help cushion the economic impact of broad structural reforms.

“Italy is undertaking reform, because it’s right to do it not because Europe is asking us to,” he told reporters as he unveiled a new website that will track progress in implementing a 1,000-day reform programme.

“Our reforms are going in this direction. We’re doing them sticking to the 3 percent (ceiling) and using the flexibility which the rules already allow us to today,” he said.

Italy’s fall back into recession and the growing likelihood that the economy will again fail to grow this year have added pressure on the government to come up with new spending cuts or other measures to meet the EU deficit target.

Renzi has said the next budget law, due to be published in mid-October, will have to find 15 billion euros (11.86 billion pounds) in spending cuts to ensure the target is met.

On Monday Carlo Cottarelli, the Spending Review Commissioner whose job is to make proposals on where the savings can be found, said 500 million euros could come from thinning out the plethora of service companies part-owned by local authorities.

Cottarelli told reporters that in four years 2-3 billion euros could be saved by reducing these companies from more than 10,000 at present to 1,000 as in France.

He declined to comment on reports he plans to resign next month because of frictions with Renzi, who has so far adopted very few of his proposals or given his public support to them.

Italian officials have floated different suggestions for opening up more room for budget flexibility while still respecting EU rules.

Last week, Transport Minister Maurizio Lupi proposed excluding spending on infrastructure investments from deficit calculations.

Reporting by Giuseppe Fonte and Gavin Jones Writing by James Mackenzie; Editing by Catherine Evans

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