* Govt committed to sticking within EU's 3 pct deficit limit
* Decree aims to provide liquidity to firms, help recovery
* Small business group say process is too complicated
By Catherine Hornby and Giuseppe Fonte
ROME, April 6 Italy's caretaker government said
on Saturday it would pay 40 billion euros ($52 billion) that the
state owes to private companies over the next 12 months, while
vowing to stick within the European Union's deficit limit.
The cabinet approved a decree intended to provide funds to
cash-strapped firms and help tackle a deep recession in the euro
zone's third-largest economy. But some industry groups said it
would be difficult for businesses to claim their money despite
The massive backlog of bills unpaid by Italy's public
administration has long been a complaint by companies, which are
having difficulty raising credit from banks that are facing
increasingly tight credit conditions themselves.
Prime Minister Mario Monti said on Saturday that delayed
payment of bills was "an unacceptable situation that has been
accepted for a long time".
Monti, who continues to lead a caretaker government after an
inconclusive February election, has been in talks with the
European Commission, which is concerned about the impact the
decree will have on Italy's deficit and its massive public debt.
The measures were originally due to be approved on Wednesday
but were delayed due to doubts over how they would be funded.
Monti said on Saturday the government was committed to
remaining within the European Union's fiscal deficit ceiling of
3 percent of gross domestic product.
"Economic policy is not changing course, and we don't
believe that to revive the economy you have to create more
public debt," he told a news conference.
Last month the government eased its deficit target for this
year to 2.9 percent of GDP from a previous target of 1.8
percent, partly to allow the payments to private firms.
Local authorities lacking their own resources to pay bills
will receive money from the central state, and will be asked to
set out a plan to reimburse it within 30 years.
"We have to follow a path between the two requirements: to
help our economy to recover ... and to maintain budget
discipline," Economy Minister Vittorio Grilli said. "It's a
narrow path but a path that is absolutely viable."
Grilli said the government planned to examine its fiscal
performance again in September and the Economy Ministry would be
able to adopt corrective measures if the deficit looked likely
to breach the "precautionary" limit of 2.9 percent.
PAYMENTS COULD START MONDAY
He said payments to companies could begin as soon as the
decree is published officially, expected as early as Monday.
Grilli is due to meet European Economic Affairs Commissioner
Olli Rehn in Brussels on Monday to explain the new measures, a
government source told Reuters.
Monti said he was hopeful Rome would be able in May to exit
the European Commission's excessive deficit procedure, which
imposes corrective measures on countries that exceed the deficit
Italy has been in political limbo for weeks with no party
able to form a government while economic problems pile up.
Public finance data so far this year has not been
encouraging, with borrowing in the first quarter higher than the
same period of 2012.
The government says settling the bills will provide a cash
injection for an economy now stuck in its longest recession for
But it has proved difficult to find the money to pay the
companies, most in the healthcare and construction sectors,
which have total accumulated claims estimated by the Bank of
Italy at some 90 billion euros at the end of 2011.
Italy will raise its target for government bond issuance in
2013 and 2014 to pay off a portion of the outstanding debts, a
senior Treasury source told Reuters on Thursday.
Some industry groups criticised the decree on Saturday.
"The proposed mechanism makes it almost impossible for firms
to recover what they are owed," said Carlo Sangalli, head of the
small business association Rete Imprese Italia.
Giorgio Squinzi, head of Italy's biggest employers' lobby,
Confindustria, told SkyTG24 television he wanted to see the
final text of the decree, but warned that Italy was in a
"desperate crisis" and "immediate action" was necessary.
Italy's biggest trade union, CGIL, said the decree, though
slow to arrive, was a "positive signal that could provide oxygen
to an economic system in serious difficulties".
Thousands of small Italian firms have gone bust since the
beginning of the year, many of them unable to pay employees as
they wait for the state to settle bills up to two years old.