Italy slashes growth outlook, hikes deficit, debt goals

ROME, Sept 20 (Reuters) - Italy said on Thursday that recession this year would be far steeper than previously expected and sharply hiked its target for the budget deficit, showing Mario Monti's attempts to rein in the debt are falling short despite his austerity measures.

The government forecast that gross domestic product would fall this year by 2.4 percent, twice as much as the previous projection of a 1.2 percent drop, made in April.

The economy is now also forecast to contract next year, by 0.2 percent, compared with positive growth of 0.5 percent seen previously, according to the Treasury's update to its Economic and Financial Document (DEF), which was approved by the cabinet after a three-hour meeting.

The weakening economy is badly hurting fiscal consolidation efforts. The government hiked its forecast for the 2012 budget deficit to 2.6 percent from 1.7 percent, and raised the 2013 target to 1.8 percent from 0.5 percent.