Davos: Tria says Italy will hit budget goal, no need for correction

By Silvia Aloisi

DAVOS, Switzerland (Reuters) - Italy will meet its key budget deficit target for this year and there is no need for any corrective measures to prevent an overshoot, Economy Minister Giovanni Tria said on Wednesday.

Rome is targeting the deficit at 2.04 percent of gross domestic product, but with economic growth slowing many analysts expect a higher figure unless new belt tightening measures are adopted.

"There is no need for any corrective package," Tria told Reuters in an interview. "Corrective measures at a time of sharp economic slowdown, which would tend to accentuate the slowdown, would run against all logic," he added.

The Bank of Italy said last week that GDP probably contracted at the end of last year for the second straight quarter, putting the euro zone's third largest economy into what economists define as a technical recession.

"There is a significant slowdown in Europe, including in Germany which is the economic and manufacturing engine of Europe, and there is also a strong impact on Italy," said Tria.

The Bank of Italy forecast growth of 0.6 percent this year, around half the government's 1.0 percent target, which would reduce revenues and make it harder to meet public finance goals.

The government of the anti-establishment 5-Star Movement and the right-wing League lowered the deficit target after a protracted tussle with the European Commission.

However, Tria said there was no doubt that Italy's structural deficit, which strips out the effects of growth fluctuations on public accounts, would remain stable from last year, as pledged to Brussels.

"If there is a worse slowdown than we expected we will keep the target of the structural deficit, as for the nominal deficit, we will see," said the 7-year-old academic who is not a member of either ruling party.

He stressed that the deal with the EU Commission was based on the structural deficit, "and so this is independent of how the economic cycle goes."

Market pressure on Italy has eased considerably since the budget deal with the Commission, but signs of marked fiscal slippage could once again dampen investor appetite for Italian debt.

(Reporting by Silvia Aloisi, writing by Silvia Aloisi and Gavin Jones, editing by Toby Chopra)