Italian companies will share in a payout of €40bn after the Cabinet of prime minister Mario Monti’s caretaker government approved a bill to pay back debt owed to the private sector to spur recovery in Italy’s recession-hit economy.
The bill’s timetable is for €40bn in payments over one year instead of over two years, the period proposed previously. “The payment will happen within 12 months,” economic development minister Corrado Passera confirmed at a press conference. The Cabinet also approved measures to contain Italy’s deficit to 2.9% of gross domestic product (GDP) this year, according to an e-mailed statement.
Around 215,000 companies are affected and the average debt is €422,000. Some two-thirds of the debts are owed to medical companies supplying the public health sector and the payments also include infrastructure projects.
Finance minister Vittorio Grilli added at the press conference that €20bn will be paid this year but have only a modest effect on this year’s deficit, but the payments will gradually increase Italy’s debt by €40bn. Payment of debts taken over by banks from suppliers will be made through government bonds, the statement said. Passera estimated these debts at between €15bn and €20bn.
Italy, which has Europe’s second-biggest debt burden, has been in recession since H211 2011. The Treasury expects the eurozone’s third-largest economy to shrink 1.3% this year, but to edge back into growth by the same amount in 2014.
Fitch Ratings cut Italy’s credit rating last month by one notch to BBB+ as an
inconclusive election in February
produced political paralysis that threatens the country’s ability to deal with the recession. The credit ratings agency (CRA) also said it expects Italy’s GDP to decline 1.8% this year as public debt peaks at almost 130%, up from 127% in 2012.
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