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Italy employers back 3 per cent deficit to invest in infrastructure

[ROME] Italy's employers federation, which tends to lobby for tight budget deficits, said on Friday the government would be right to hike next year's fiscal gap to the EU limit if it spent the extra funds on infrastructure.

Confindustria head Vincenzo Boccia said he supported efforts by the anti-establishment government that took office in June to lobby the EU to exclude infrastructure investments from deficit calculations.

Following the collapse last week of a motorway bridge in Genoa that killed 43 people, the government promised large scale investments to shore up creaking railways, roads, riverbanks and schools.

Raising the deficit to the European Union's 3 per cent of gross domestic product ceiling was "not a taboo" if the fiscal leeway was used to boost investments and growth, Boccia told SkyTG24 television in an interview.

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"If our policy objectives are more growth to pay down the debt, and they regard investments in growth in the interests of the country then they are more than justifiable," he said.

Italy's public debt, at around 132 per cent of national output, is the highest in the EU after Greece, and markets are nervous the government will push that figure up.

Italy's deficit target for next year, inherited from the previous centre-left government, is 0.8 per cent of GDP, down from a targeted 1.6 per cent this year.

The coalition of the right-wing League and the 5-Star Movement has made clear it will raise the target to fund costly plans including higher welfare payouts and tax cuts, but it has not said yet by how much.

A top government official on Monday declined to rule out setting it above the 3 per cent limit, linking the possibility to the Genoa disaster.

Boccia's words are likely to be welcomed by the government, after he was critical of its only significant legislation so far, aimed at limiting firms' use of temporary contracts and cracking down on those that move production abroad.

The government is due to issue new economic and fiscal targets by the end of September, before the 2019 budget is presented by Oct 20.

REUTERS