Italy Needs Deficit to Spur Growth, Gualtieri Tells La Stampa

(Bloomberg) -- Italy is set to keep its economic policy expansionary next year to support its coronavirus-battered economy, as agreed with European Union partners, Finance Minister Roberto Gualtieri said in an interview with La Stampa Sunday.

That could require widening the deficit further next year to support economic growth, but that won’t impact a planned reduction after 2021 and will allow Italy to reach its growth targets, he said.

The euro area’s third-largest economy has struggled to deal with the fallout from the pandemic, and the ruling coalition led by Prime Minister Giuseppe Conte has already deployed over 100 billion euros ($123 billion) in stimulus spending to protect it from the impact of the virus and lockdown measures.

Even if debt is set to rise close to 160% of output, Gualtieri is confident that extra spending will spur Italy’s growth with a positive impact on the debt trajectory. The Treasury forecasts the economy will contract 9% this year then expand 6% next year, with help from European Union recovery funds.

Italy expects to get about 200 billion euros in recovery funds -- the biggest share for any EU member -- but Conte has sparred with coalition allies over who gets to decide how to spend those. The clash within the coalition could delay the use of the funds, Gualtieri, a member of the center-left Democratic Party, warned in the interview.

In a separate interview with Il Messaggero also published Sunday, Italy’s minister for European affairs, Vincenzo Amendola, also a member of the Democratic Party, said that clashes initiated by former Premier Matteo Renzi could delay the deployment of funds. He has repeatedly threatened Conte’s government over the oversight of EU funding.

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