EU sees 2006 Italy deficit at 4.2 percent of GDP

The European Commission, in its forthcoming Spring Economic Forecast, will estimate Italy's deficit this year at 4.2 percent of GDP, above a 3.8 percent forecast from the Treasury Ministry, newspapers said on Sunday.
The document will forecast Italy's debt at 108 percent of GDP, Il Messaggero and La Repubblica newspapers reported - which would be the second increase in a row, after debt rose to 106.4 percent of GDP last year.
The Commission's official forecast will be released on Monday.
Last month, the IMF's delegation chief for Italy, Alessandro Leipold, said the public deficit could rise to 4.25 percent of GDP in 2006.
Italy's budget deficit has exceeded the European Union's 3 percent of GDP ceiling for the last three years and the 2005 deficit, at 4.1 percent, was the highest since 1996 - before Italy joined the European Monetary Union.
Romano Prodi, whose centre-left coalition narrowly won elections last month, has said he would have to carry out due diligence of public accounts before confirming the 3.8 percent of GDP target for the deficit.
The debt-to-GDP ratio rose last year to 106.4 percent, the first increase for more than a decade and is forecast by the IMF and most other independent bodies to increase again in 2006.
The Spring Economic Forecast is expected to estimate Italian economic growth of 1.3 percent in 2006 and 2007, Italy's ANSA news agency reported on Friday.
Italy last month cut its 2006 growth forecast to 1.3 percent, in line with the Commission's reported estimate. The Italian Treasury's previous forecast had been for 1.5 percent economic growth.