Solbes warns Italy's optimistic forecasts may need review

The Economic and Monetary Affairs Commissioner, Mr Pedro Solbes, has warned Italy that some of its economic forecasts could be too optimistic and might have to be revised downwards.

Speaking in Frankfurt, where he was attending a Bundesbank conference, Mr Solbes said that Italy's assessment of its potential growth at about 3 per cent was implausible.

"If we are right, and on the basis of our analysis we could be right, some of the perspectives which they have introduced into their analysis ought to be modified on the down side. This is the point of difference that we have with them," he said.

Italy expects its economy to grow by 0.6 per cent this year and 2.3 per cent in 2003 and expects its budget deficit to be below 2.4 per cent of GDP this year. But Mr Solbes warned that the Italian government had to be prudent in managing its public deficit.

The Commission has already initiated disciplinary procedures against Portugal and Germany for running deficits exceeding the 3 per cent limit laid down in the Stability and Growth pact.

Mr Solbes said he was disappointed by the cavalier attitude some member-states took towards the Stability Pact and the Broad Economic Policy Guidelines.

"Member-states come in June and commit themselves to various obligations and then they set out their budgets in September and behave completely differently," he said.

The Commissioner said that the recent worsening in national budget deficits could not be blamed solely on international economic conditions. He said the problems could be traced back to missed opportunities to apply budget discipline in 1999 and 2000 when conditions were better.

Mr Solbes defended the 3 per cent limit on budget deficits as a key element in the Stability and Growth Pact.

"If we don't accept that there is a limit, then the whole system won't function," he said.