Italy on Tuesday cut its economic growth forecasts and sharply hiked its target for next year’s budget deficit for the second time in five months, setting up a potential clash with Brussels.
The forecasts will set the framework for next year’s budget and Italian Prime Minister Matteo Renzi is anxious to avoid unpopular belt-tightening measures ahead of a December referendum on constitutional reform that could decide his political future.
The European Commission has urged Rome not to ease up on previously agreed fiscal targets, but the eurozone’s third-largest economy has slowed and posted no growth in the second quarter, upsetting previous public finance assumptions.
The Italian Treasury’s Economic and Financial Document cut this year’s growth outlook to 0.8 percent from a 1.2 percent forecast made in April, and lowered next year’s growth to 1 percent from 1.4 percent.
The goal for this year’s budget deficit was nudged up to 2.4 percent of GDP from 2.3 percent and next year’s deficit was hiked to 2 percent from 1.8 percent.
However, taking into account extra spending on immigration and earthquake reconstruction that the government expects to exclude from EU calculations, Renzi said the real deficit next year could hit 2.4 percent.
Italy has repeatedly raised its deficit targets in recent years. The goal for next year had stood at 1.1 percent until April, when Renzi lifted it to 1.8 percent.
Brussels is particularly concerned about Italy’s public debt, which has risen to more than 132 percent of GDP, the highest in the eurozone after Greece’s.
The government on Tuesday said that despite repeated assurances, it would not lower the debt-to-GDP ratio this year, saying it would come in at 132.8 percent against a previous target of 132.4 percent. It stood at 132.3 percent last year.
Italy’s growth has continued to underperform the country’s partners and ground to a halt in the second quarter, held back by weak domestic demand.
Renzi wants greater flexibility in the EU’s Stability Pact and says any money he spends on tackling the influx of migrants from North Africa and making Italy’s schools earthquake proof will not be included in overall deficit limits.
“What is spent on immigration and the earthquake will not be counted in the Stability Pact,” he said on Tuesday.
He added that he was not only referring to the costs of rebuilding the hill towns destroyed by an earthquake in central Italy on Aug. 24, but also the cost of making Italy’s schools safe throughout the country.
“The stability of our children is more important than the stability of European bureaucracy,” he said, blasting the EU’s fiscal rules as “old and absurd.”
He also told reporters that Europe owed Italy “a huge debt on immigration,” saying the country was spending heavily to accommodate tens of thousands of mainly African refugees who have been arriving on boats from Libya and Egypt.
It remains to be seen whether the European Commission will agree with Renzi’s approach, especially as in the case of the schools he is asking for prior agreement to spend more, not for lenience over money spent on an emergency.
The European Commission says Italy was already granted “unprecedented” flexibility, worth about 19 billion euros (US$21.29 billion) in this year’s budget.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)