Table 1 – Public Finance, policy scenario and scenario based on unchangend legislation (as % of GDP)
2003 2004 2005 2006 2007 2008 2009 2010 2011
Net borrowing at unchanged legislation:
DPEF (June 2007) -3.5 -3.5 -4.2 -4.4 -2.5 -2.2 -1.9 -1.4 -1.3
Update (September 2007) -3.5 -3.5 -4.2 -4.4 -1.9 -1.8 -1.6 -1.2 -1.0
2007 Decree Law and 2008 Budget:
Net borrowing after additional budget
package -3.5 -3.5 -4.2 -4.4 -2.4 -2.2 -1.9 -1.5 -1.2
Tax burden* 41.4 40.6 40.6 42.3 43.0 43.0 42.8 42.6 42.5
Current primary expenditure* 39.1 39.3 40.0 39.9 39.8 40.0 39.3 38.8 38.6
Primary surplus 1.6 1.3 0.3 0.1 2.5 2.6 3.0 3.4 3.6
Net borrowing, policy scenario:
DPEF (June 2007) -2.5 -2.2 -1.5 -0.7 0.1
Update (September 2007) -2.4 -2.2 -1.5 -0.7 0.0
Package as to be adopted as of 2009 -0.4 -0.4 -0.4
Public debt 104.3 103.8 106.2 106.8 105.0 103.5 101.5 98.5 95.1
Preliminary estimatesSource: Forecast and Planning Report for 2008, Ministry of Economy and Finance, September 2007The current level of the debt-to-GDP ratio is also an important item in terms of risk to public finance
sustainability, since a principal challenge facing Italian public finances is to reduce the public debt ratio.
According to the last Italy’s Stability programme^2 , in 2006 the debt-to-GDP ratio increased by 0.6 per cent
compared to 2005, from 106.2 to 106.8 per cent. This increase was 0.4 per cent below the forecast made in the
2006 Update to Stability Programme. In future years the reduction rate of the ratio is expected to be in line with
last year’s forecasts. In 2008 the decline is approximately 1.5 per cent of GDP compared to 2007 (as in the last
Update) while in 2009 the decrease reaches 2 per cent compared to 2008 (0.1 per cent more than in the last
Update). In the final years of the forecast the rate of change is more marked compared to last year’s Update.
Even though both reports expect a balanced budget to be achieved by 2011, in this year’ Update the cash
requirements are projected to decrease more rapidly. The debt-to-GDP ratio decreases below 100 per cent as
early as 2010 (a year earlier compared to the 2006 Update) reaching 95.1 per cent in 2011 (see table 2).
Table 2 – Debt-to-GDP ratio
2005 2006 2007 2008 2009 2010 2011
Government debt
Debt 106.2 106.8 105.0 103.5 101.5 98.5 95.1
% change in debt 2.4 0.6 -1.8 -1.5 -2.0 -3.0 -3.4
Contributions to change in Government debt (as % of GDP)
Primary balance (accrual basis) -0.3 -0.1 -2.5 -2.6 -3.4 -4.2 -4.9
Snow-ball effect 2.1 0.8 0.1 0.9 1.5 1.5 1.6
of which: Interest expenditure (accrual basis) 4.5 4.6 4.8 4.9 4.9 4.9 4.8
Stock - flow adjustment 0.6 -0.1 0.6 0.2 -0.1 -0.3 -0.1
of which: Difference between cash and accrual basis -0.3 -1.5 -0.3 0.0
Net accumulaztion of financial assets 1.0 0.8 0.5 0.4
of which: Privatisation proceeds -0.3
Evaluation effects of Government debt -0.1 0.2 0.3 0.1
Other -0.1
p. m. Tasso di interesse implicito sul Debito 4.4 4.5 4.7 4.8 4.9 5.0 5.1
1) Decimals may not add due to rounding to the first decimal place.
2) The 2005 and 2006 data include changes in cash holdings on the Treasury deposit account held at the Bank of Italy. In
particular 2006 data includes the increase in cash holdings needed to cover the pre-funding of the VAT reimbursements
related to the ECJ 2006 sentenceSource: Italy’s Stability Programme, Ministry of Economy and Finance, November 2007(^2) The complete report is available on the internet site: http://www.tesoro.it/web/DFP/index.asp?doc=705