Moody’s annual report on Italy has put premier Romano Prodi in good spirits. The leading US credit rating agency recently commended the Leftist government’s belt-tightening budget for ‘starting to boost competitiveness’ in the restricted Italian market.
Despite the recent political fragility of his shaky one-year majority government, Prodi’s resolve to sustain an unpopular 34.7 billion euro budget and extensive deficit-busting plan has undeniably put Italy’s books back in the black. Due to widespread tax hikes and public spending cuts, Prodi has announced that ‘the public accounts emergency is over’. Meeting EU public accounts targets is a top priority for the centre-left government. According to Moody’s, Prodi’s plan has produced a ‘slow but steady’ drop in the country’s debt/GDP ratio from 123.8 percent in 1996 to 106.8 percent in 2006.
Italy’s projected 2.2 percent growth of the GDP in 2007 would be the economy’s best performance in seven years and would yield the government an unexpected surplus of 10 billion euro. About 2.5 billion of this ‘mini-treasure’ will go towards social welfare programs, while the rest will be directed towards taking bigger chunks out of the country’s public debt, which is the third largest in the world.