The European Commission sees a distinct risk that Italy's 2004 budget deficit could top a 3.0 percent of GDP ceiling set by Brussels, two Italian newspapers said on Friday, quoting a document to be published on April 7. "There is a distinct risk that the deficit will exceed 3.0 percent of GDP," the document reads, according to daily Corriere della Sera. Italy has an official budget deficit forecast of 2.2 percent of gross domestic product (GDP) for this year although Treasury officials have said it could be considerably higher, pushing it close to the 3.0 percent ceiling. France and Germany have both broken the rules established in the European Union's Growth and Stability Pact. According to the document obtained by Corriere and la Repubblica, the Commission will urge Italy to take measures to rein in its deficit and avoid an early warning.
"(The Commission) invites Italy to be ready to adopt further measures to avoid the verification of an excessive deficit," the document reportedly says. It also criticises Italy's Economy Ministry for increasing rather than decreasing its reliance on one-off measures to control the 2003 deficit, which came in at a better-than- expected 2.4 percent of GDP. Prime Minister Silvio Berlusconi has come under criticism from Brussels for his announced plans to slash taxes in a bid to kick start the economy. The Commission said on Thursday that Italy should cut taxes only if its public finances were in good shape and if the Treasury could offset lost revenues. Cuts should also be part of a broader structural reform.///www..com