Italian deficit falls to 2.7% in third quarter

Italy’s public deficit fell to 2.7 per cent in the third quarter from 3.5 per cent 12 months earlier – its lowest level since the fourth quarter of 2008 when it was 2.2 per cent, the Istat data agency said yesterday.

The figure was down sharply from 3.5 per cent in the third quarter of 2010 while over the first nine months of the year, the shortfall between government spending and income was 4.3 per cent compared to 4.6 per cent over the same period in 2010, it added.

Italy has approved three austerity budgets over the past year in an effort to drive down its giant public debt, which has rattled financial markets and pushed the eurozone’s third largest economy to the brink of bankruptcy.

Excluding interest on its €1.9 trillion accumulated debt, Italy had a primary surplus equivalent to 1.7 per cent of gross domestic product (GDP) in the third quarter – far higher than 0.6 per cent a year earlier.

Over the first nine months of 2011, its primary surplus was 0.3 per cent compared to a 0.3 per cent deficit over the same period in 2010.

Istat said the figures can vary widely from quarter to quarter and are not based on the same calculations that are submitted to the European Commission.

Under pressure from the European Union and the markets, Italy is aiming to achieve a balanced budget by 2013.

The EU sets a deficit limit of three per cent but member states have for years ignored the rule, with difficult decisions now needed to get the figures back in line and stabilise the public finances.