Italy hikes deficit, debt targets to help economy

ROME, March 21 Thu Mar 21, 2013 9:36am EDT

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ROME, March 21 (Reuters) - Italy's outgoing government on Thursday sharply hiked its fiscal deficit targets for this year and 2014 and announced it would raise debt by 40 billion euros over the two years to inject much-needed liquidity into the recession-hit economy.

Economy Minister Vittorio Grilli told reporters the economy would contract by 1.3 percent this year, compared with a previous forecast of -0.2 percent.

Partly as a result of the worse economic outlook and partly to allow the payment of government debts to private firms, the fiscal deficit will come in at 2.9 percent of output this year, up from a previous target of 1.8 percent, Grillo said.

Last year's deficit was 3.0 percent of GDP.

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