ROME, Oct. 3 (Xinhua) -- Italy's rightwing-populist government on Wednesday revised downward its deficit targets for 2020 and 2021 in what will be its first national budget since taking office in June.
The government promised voters in a "contract" that it would cut taxes, introduce a universal basic income, and roll back unpopular pension reforms -- and it would raise deficit spending to do so.
Finance Minister Giovanni Tria told a televised press conference that Italy's next budget will set a deficit target of 2.4 percent of gross domestic product (GDP) in 2019, bringing it down to 2.1 percent in 2020 and to 1.8 percent of GDP in 2021.
"Our aim is to use public investments as our main tool to promote growth," said Tria. "With this budget, we will halve the gap between the Italian and the European growth rate in 2019."
Initial government plans to set those targets at 2.4 percent of GDP for the next three years threw financial markets into turmoil and sparked criticism from European Union (EU) officials.
The spread between Italian 10-year sovereign bonds and their German counterparts, a key indicator of investor confidence, flew to 300 points in mid-morning trading before closing at 283 basis points on Wednesday.
For comparison, the spread oscillated at 130 points in early 2018, before the March election that brought the current populist, anti-euro government to power.
The higher the spread, the more expensive it is for a country to borrow money, and the lower the investor confidence in that country.
This is especially important for Italy, whose GDP amounted to 1.7 trillion euros in 2017 but whose public debt stood at 2.3 trillion euros in July 2018 -- meaning that the country owes far more than it produces.
Earlier in the day, Confindustria industrialists' association raised the alarm over the country's slowing economy and the government's budget plans.
National GDP, which grew by 1.6 percent in 2017, will slow to 1.1 percent in 2018 and to 0.9 percent next year, and this will be partly because the rising spread will mean tighter credit, according to Confindustria estimates.
The industrialists' association listed additional drags on the economy as "the trust that markets will place on the government's budget, in terms of its capacity to refinance expiring public debt" and the "sustainability of the government contract".
However, all the pledges contained in the contract were confirmed by Prime Minister Giuseppe Conte and by Deputy Prime Ministers Matteo Salvini and Luigi Di Maio, who were also present at the press conference on Wednesday evening.
"We are honoring the commitments we made: this budget is serious, responsible, and courageous," said Conte. "We won't give up on what we wrote in our government contract -- they were not just electoral promises."
He added that thanks to the budget measures, the government can "reasonably expect" to bring the unemployment rate "down to eight if not seven percent" from its current rate of around 10 percent.
Salvini said the budget will introduce a 15 percent flat tax for small businesses, contain "significant tax discounts" for businesses that re-invest and hire new workers, and that it will allow for the hiring of 10,000 police officers.
Di Maio said that the budget will finance a basic income, which has been reported in the past as being set at 780 euros a month, for the unemployed while helping them re-enter the labor market.
He also promised to reduce government waste. "In 2019, we will cut everything that isn't needed for the state budget," said Di Maio.
The budget, which is still in the planning stages, must be approved by Italy's parliament and by the EU before going into effect.
