EU Commission queries Italian deficit figures

The European Commission yesterday shed doubts over Italy's reporting of official budget figures, key to enforcement of the euro's fiscal rules.

The Commission said it has presented a report raising questions over Italian statistics on public debt and spending deficits and is now awaiting the Italian government's reaction.

Budgetary deficit figures are critical to an EU assessment of the Stability and Growth Pact target setting a ceiling of three per cent of GDP for public debt.

Last week, Brussels took Greece to the European courts for publishing false budget deficit figures over a six-year period, including the years Greece was assessed for euro membership.

Italy's shortcomings are not thought to be as extensive as Greece's misreporting but the Commission is still concerned. According to official figures, Italy has always sailed close but under the three per cent limit since 1997 - with 2004 budget deficits projected at 2.9 per cent. However, according to the Commission, the Italian sums do not add up, with calculations falling below the actual amount of cash borrowed to finance public debt.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said on Monday that Brussels was investigating. He said "there is no clear coherence between the evolution of the debt and the evolution of the public deficit".

If Commission figures are accurate Italy has been breaching EU fiscal rules since 1997, sailing 4.3 per cent into the red in 2001 and 4.3 per cent in 2003. The row will focus political attention on Italy's budget management, with widespread domestic and European criticism of current Italian plans to cut taxes.

Mr Almunia also expressed concern that Prime Minister Silvio Berlusconi's €6.5 billion tax giveaway may compound problems.