Budget Deficit Target

Well, this doesn't sound like good news:

The Italian government is set to increase its 2007 budget deficit target, a victory for coalition leftists who want more public spending....In what would be a big boost for the left wing of Romano Prodi’s centre-left government, which has criticised the economy minister’s insistence on budget rigour, the 2007 deficit target would be increased to 2.5 per cent of gross domestic product from the current 2.3 per cent forecast.


Now certainly the projected change does not appear to be massive. As Anna Finocchiaro says "in terms of percentages, we’re talking about tenths of a percentage point", but then again we are talking about forecasts, and economic growth may yet turn out to be below expectations, in which case the deficit would come in above target. Really - at this point - it is a question of the signals you send. And again, in the background, there is this:

The government is consulting unions on how to alter pension reforms, passed under the former centre-right administration, to raise the retirement age.

Now it is not that I am looking for draconian cuts simply for the sake of them, but the key question is the sustainability of Italian government finances, and in the somewhat shorter term there is this to think about.