Italy said on Friday its budgetdeficit next year would be well below a European Union limitdespite extra spending on growth-boosting measures.
Economy Ministry Under-Secretary Gianluigi Magri said the2004 shortfall could reach 2.3 percent of gross domesticproduct, versus the three percent EU ceiling.
Italy's official target is 1.8 percent of GDP, but thegovernment reached an agreement over the 2004 budget yesterdaythat will allow five to six billion euros of spending to fostergrowth, at the cost of a higher deficit.
Earlier on Friday Labour Minister Roberto Maroni saidItaly's deficit would not come close to the EU ceiling in 2004despite extra spending.
Germany and France, the euro zone's two other majoreconomies, have breached the deficit ceiling and are in dangerof doing so again with the risk of EU fines as they seek to givepriority to fostering growth.
Asked whether Italy's growth measures would push the budgetdeficit close to the Stability and Growth Pact ceiling, Maronisaid: "No, that risk does not exist."
The 2003 deficit should not exceed 2.4 percent of GDP in2003, Magri told journalists.
Deputy Economy Minister Mario Baldassarri said on Thursdaythe growth-boosting measures would inevitably have an impact onItaly's 2004 deficit, but did not specify what the new targetwould be.
Today he added that Italy still remains committed tocutting its structural deficit by half a percentage point in2004.
Italy has agreed to cut its structural deficit, the portionof its budget deficit that is not the result of economic swings,by 0.5 percentage points every year until it is wiped out.
In a meeting with government coalition members yesterday,the Economy Ministry had agreed to boost spending in exchangefor backing for much-needed pension reforms.
The core part of pensions reform, as it is shaping up, willnot come into effect until 2008, so the package is not expectedto have an impact on the 2004 budget.
But the government believes that the European Union willaccept a higher-than-forecast deficit next year if Italy enactsstructural reform on its pensions system which is aimed atguaranteeing long-term budget stability.