Italy has cut its public spending by about €30bn per year as a result of a controversial review of its expenditure, senior government officials said on Tuesday in an attempt to defend their record on fiscal discipline.
In a presentation at the Italian parliament, Yoram Gutgeld – the spending chief in the centre-left government – said that a review of expenditure that began in 2014 had yielded savings of €25bn in 2016, with €30bn and €31.5bn more to come in 2017 and 2018 respectively.
The data offered by Mr Gutgeld comes as Italy is preparing to present its annual budget in October, which is expected to be the object of tough scrutiny by EU authorities.
Italy is expected to push for a higher budget deficit limit than previously agreed with the EU, in order to support its sluggish economic recovery ahead of a general election to be held in early 2018 at the latest.
“We are not aspiring for cuts, we are aiming for efficiency,” said Paolo Gentiloni, prime minister, said as he flanked Mr Gutgeld at the presentation. “If we really want to accompany the recovery which is showing positive signs in our country, we have to continue with this work,” he added.
Because of its high level of public debt – worth about 133 per cent of GDP – Italy is under constant pressure to get its fiscal house in order so that it is less vulnerable to the kind of sovereign debt crisis it experienced in 2011.
The International Monetary Fund has acknowledged Rome’s “efforts” in recent years to cut spending, but said “further steps” are still needed.
Mr Gutgeld said cuts implemented since 2014 were focused on public procurement, health spending, and cuts to government personnel through attrition. The so-called “spending review” – launched by former prime minister Matteo Renzi – has come under fire in the past for not being aggressive enough. Mr Gutgeld’s predecessor in the role, Carlo Cottarelli, left the position amid tensions with Mr Renzi.
But Mr Gutgeld said public sector spending in Italy – aside from the high cost of interest payments – had increased by just 0.2 per cent between 2013 and 2016, compared to an EU average of 6.6 per cent.