Italian government plans to pay its bills

ITALY’s caretaker government said on Saturday it would pay €40bn that the state owes to private companies over the next 12 months, while vowing to stick within the European Union’s (EU’s) deficit limit.

The cabinet approved a decree intended to provide funds to cashstrapped firms and help tackle a deep recession. But some industry groups said it would be difficult for businesses to claim their money, despite the measures.

The backlog of bills unpaid by Italy’s public administration has long been a complaint by companies, which are having difficulty raising credit from banks that are facing increasingly tight credit conditions themselves.

Prime Minister Mario Monti said on Saturday that delayed payment of bills was “an unac- ceptable situation that has been accepted for a long time”.

Mr Monti, who continues to lead a caretaker government after an inconclusive February election, has been in talks with the European Commission, which is concerned about the effect the decree will have on Italy’s deficit and its public debt.

The measures were to be approved last Wednesday but were delayed because of doubts over how they would be funded.

Monti said the government was committed to remaining within the EU’s fiscal deficit ceiling of 3% of gross domestic product (GDP). “Economic policy is not changing course, and we don’t believe that to revive the economy you have to create more public debt,” he said.

Last month the government eased its deficit target for this year to 2.9% of GDP from 1.8%, partly to allow the payments to private firms. Reuters