Italy to pay 40 billion euros of state debt to companies

Sat Apr 6, 2013 2:35pm EDT
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By Catherine Hornby and Giuseppe Fonte

ROME (Reuters) - Italy's caretaker government said on Saturday it would pay 40 billion euros ($52 billion) that the state owes to private companies over the next 12 months, while vowing to stick within the European Union's deficit limit.

The cabinet approved a decree intended to provide funds to cash-strapped firms and help tackle a deep recession in the euro zone's third-largest economy. But some industry groups said it would be difficult for businesses to claim their money despite the measures.

The massive backlog of bills unpaid by Italy's public administration has long been a complaint by companies, which are having difficulty raising credit from banks that are facing increasingly tight credit conditions themselves.

Prime Minister Mario Monti said on Saturday that delayed payment of bills was "an unacceptable situation that has been accepted for a long time".

Monti, who continues to lead a caretaker government after an inconclusive February election, has been in talks with the European Commission, which is concerned about the impact the decree will have on Italy's deficit and its massive public debt.

The measures were originally due to be approved on Wednesday but were delayed due to doubts over how they would be funded.

Monti said on Saturday the government was committed to remaining within the European Union's fiscal deficit ceiling of 3 percent of gross domestic product.

"Economic policy is not changing course, and we don't believe that to revive the economy you have to create more public debt," he told a news conference.   Continued...

The headquarters of the Bank of Italy is pictured in downtown Milan January 11, 2013. REUTERS/Alessandro Garofalo