While admitting that Italy's public accounts were in a worse state than expected, Italian Premier Romano Prodi stopped short on Monday of saying that budget adjustments were in the pipeline.
Speaking to reporters during his first visit abroad since beating previous premier Silvio Berlusconi at the polls last month, Prodi said that "we haven't decided anything yet on a mini-budget".
Prodi also said he did not discuss the issue during talks here with European Commission chief José Manuel Barroso.
"There will be other opportunities to talk about economic problems," Barroso confirmed in a joint press conference with Prodi, his predecessor at the EC. According to press reports, the Prodi government is considering a 7-10 billion euro mini-budget to curb the deficit, seen as hitting some 5% of GDP this year unless corrective measures are taken.
The Berlusconi government, which predicted a deficit of 3.8% this year, had promised the EC that the deficit would be back below the bloc's 3% ceiling by the end of 2007. The media speculated that Prodi would ask the EC for an extension on that deadline.
Prodi said on Monday that no time frame had been set or discussed, stressing that his government was still busy looking at the exact state of the accounts.
"Before we do anything, we need the precise figures... We have to be certain of what state we are currently in before we can decide what corrections must be made," he said. The former economics professor said he hoped to avoid halting public works projects, a possibility that was aired on Sunday by Economy Minister Tommaso Padoa Schioppa. Padoa Schioppa said motorway and rail works were at risk of being closed down, stressing that "the situation is much worse than it seemed at the beginning".
Infrastructure Minister Antonio Di Pietro issued a statement confirming that "there isn't any money and there is the risk that many infrastructure works will have to be closed".
Italy's budget deficit has breached the EU's 3% ceiling for the past three years, hitting 4.1% in 2005 - the highest level since 1996.
Meanwhile, Italy's debt mountain - the third biggest in the world - began rising last year for the first time in a decade and is forecast by the European Commission to hit 107.4% of GDP this year. International credit rating agencies have warned that
they may downgrade the country's credit ratings unless concrete action is taken on the deficit and debt fronts.
Amelia Torres, spokeswoman for European Commissioner for Economic and Monetary Affairs Joaquin Almunia, said on Monday that "it's important to recover a certain credibility and reduce the debt". "We expect the government to rigorously apply the 2006 budget and adopt one for 2007 which follows the same strategy of consolidation," she said.
Meanwhile, Berlusconi's Forza Italia party said it would be short-sighted of the government to halt any public works.
"Prodi should stop creating alarm... Unfortunately, for him and his government, public works represent a form of spending to be cut rather than an investment for the future," Forza Italia infrastructure policy chief Maurizio Lupi said. Forza Italia MP Isabella Bertolini accused Prodi of "lying" about the state of the public accounts in order to "justify a tax sting".
"The Berlusconi government left the accounts in order," she said.
