Italy to seek proposal to boost budget deficit to 11% of GDP

Italy's Prime Minister Giuseppe Conte will likely parliament's approval to boost spending by about 10 billion euros ($11 billion) to revive the sagging economy, government officials said on Tuesday, according to Bloomberg. 

The proposal would boost Italy's budget deficit to 11% of its gross domestic product (GDP) from the current projection of 10.4%. 

The extra funds will help finance the government’s furlough program, a guarantee fund for small and medium-sized companies, resources for towns and regions as well as European Union initiatives, one official said on condition of anonymity. 

Italy is already facing a debt crisis and the coronavirus-induced slowdown and the extra spending is expected to worsen the problem. The Bank of Italy forecasts a contraction between 9.2% and 13.1% this year and a more limited rebound in 2021. Meanwhile, Italy's debt is seen rising well above 150% of GDP.

Already saddled with one of the world’s highest debt burdens, Italy is under pressure to increase spending to help the economy recover from lockdown. While activity has started rebounding since the government relaxed the curbs, the concern is that the coming months will bring more pain when aid measures including a ban on firing staff and the suspension of tax and loan payments expire.