Italy's 2003 budget deficit beat the government's target but was still bigger than a year ago, and with the debt mountain shrinking less than hoped, analysts say Prime Minister Silvio Berlusconi has no reason to crow.
National statistics body Istat said on Monday the deficit was 2.4 percent of gross domestic product last year, up from 2.3 percent in 2002 although below the Treasury's 2.5 percent goal.
The debt pile, one of the largest in the European Union, was 106.2 percent of GDP, whereas the government had confidently predicted two months ago it would fall to 104.9 percent.
Berlusconi stressed he had inherited the massive debt from previous governments and that Italy's growth problems were part of a wider European malaise.
To spur an economic recovery, Berlusconi said that taxes needed to be cut and investment and innovation promoted, and that savers' confidence, badly battered by a huge scandal at dairy firm Parmalat, needed to be rebuilt as fast as possible.
"After two years in which we have managed public finances better than our European partners, we now have to focus decisively on the economic recovery," the billionaire businessman-turned-politician said in a statement.
But analysts said the government could not really trumpet its forecast-beating deficit because it had not made the structural changes needed for long-term healthy accounts.
"The deficit is marginally better than expected, but it has to be remembered that the adjustment was obtained by using one-off measures," said Luigi Speranza at BNP Paribas. "The trend remains an upward one."
Although the eurozone's third-largest economy turned in a better deficit performance than neighbours France and Germany, which again crashed through an EU limit of three percent of GDP last year, its debt is much bigger.
"Italy's problem is the debt. There's been a lot of focus on the deficit but looking forward the debt will really swing into view - I'd say it will be the hot topic by 2005," said Vincenzo Guzzo at Morgan Stanley.
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