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Last Updated: Tuesday, 23 May 2006, 15:25 GMT 16:25 UK
Italian public debt 'a disaster'
Vincenzo Visco, right, with Prime Minister Romano Prodi
Mr Visco, right, speaking with Prime Minister Romano Prodi
A member of Italy's new government has described the country's large public deficit as a "disaster".

Deputy Economics Minister Vincenzo Visco warned that the deficit could exceed 4.5% of gross domestic product (GDP) this year, above eurozone rules.

Under guidelines for the 12 nations with the euro, members must keep their public debts below 3% of their GDP.

"The economic situation is very serious and the state of public accounts is a disaster," said Mr Visco.

Key meeting

His warning came ahead of a planned meeting on Wednesday between Italy's Economics Minister Tommaso Padoa-Schioppa and European Union Monetary Affairs Commissioner Joaquin Almunia.

Brussels has given Italy until the end of 2007 to reduce its deficit below the 3% guideline.

Mr Visco said he did not believe Mr Padoa-Schioppa would ask for more time.

His comments came as Paris-based economic think tank the Organisation for Economic Cooperation and Development (OECD) said it predicted Italy's deficit would hit 4.2% this year, rising to 4.6% in 2007.

The OECD further estimates that Italy's economy will grow by 1.4% in 2006 - faster than the 1.1% previously expected - but then by only 1.3% in 2007.

It said this year's Italian growth was being fuelled by stronger export growth and a recovery in business investment.

But it warned that Italy would continue to trail behind average eurozone economic growth "without bold structural reforms by the new government".

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