ROME, June 10 (Reuters) - An Italian austerity package could cut growth by 0.5 percent or slightly more in 2011-2012 and bring the deficit-GDP ratio down to 3 percent in 2012, a Bank of Italy official said, putting the ratio above the government's own forecast of 2.7 percent.
Speaking at a Senate hearing, Bank of Italy Director Salvatore Rossi also said Italian economic growth should continue in the second quarter at a pace similar to the 0.4 percent growth seen in the first quarter. But growth could weaken in the second half of 2010, Rossi said.
He said Italy's interest payments on debt were subject to great uncertainty and that a 1 percentage point rise or fall in interest rates on debt maturing from 2011 would cut or hike the 2012 deficit by 0.5 percentage points.
Overall, the government's assumptions on the macroeconomic envirnment are optimistic and the deficit-to-GDP ratio would stand at 3.5 percent in 2012 if they were based on forecasts by the International Monetary Fund, Rossi said.
A worsening of the economic situation could trigger the need for budget correction measures, while the government's plans to cut spending appeared 'ambitious' and would need constant monitoring, he said.
(Reporting by Giuseppe Fonte) Keywords: ITALY BUDGET/ (rome.newsroom@thomsonreuters.com; + 39 06 8522 4369; Reuters Messaging: rome.newsroom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Speaking at a Senate hearing, Bank of Italy Director Salvatore Rossi also said Italian economic growth should continue in the second quarter at a pace similar to the 0.4 percent growth seen in the first quarter. But growth could weaken in the second half of 2010, Rossi said.
He said Italy's interest payments on debt were subject to great uncertainty and that a 1 percentage point rise or fall in interest rates on debt maturing from 2011 would cut or hike the 2012 deficit by 0.5 percentage points.
Overall, the government's assumptions on the macroeconomic envirnment are optimistic and the deficit-to-GDP ratio would stand at 3.5 percent in 2012 if they were based on forecasts by the International Monetary Fund, Rossi said.
A worsening of the economic situation could trigger the need for budget correction measures, while the government's plans to cut spending appeared 'ambitious' and would need constant monitoring, he said.
(Reporting by Giuseppe Fonte) Keywords: ITALY BUDGET/ (rome.newsroom@thomsonreuters.com; + 39 06 8522 4369; Reuters Messaging: rome.newsroom.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.