ROME Italy will settle the debt arrears it owes to private sector suppliers by the end of this year, Economy Minister Pier Carlo Padoan said in a newspaper interview on Sunday, pushing back previous commitments.
The Italian state owes some 75 billion euros ($102 billion)to private suppliers, according to the most recent data from the Bank of Italy. The unpaid bills have starved companies of cash and triggered layoffs, factory closures and bankruptcies.
"We will ensure that the arrears are paid off by the end of the year," Padoan told Corriere della Sera daily.
Prime Minister Matteo Renzi promised in March to pay back all the debt arrears by July. Within a week he put back the target date to September.
The government is finding it hard to tackle the problem because of public finance constraints, inefficiency, uncertainty over exactly how much is owed and a reluctance on the part of some public bodies to acknowledge their debts.
In June, the European Commission opened a formal infringement procedure against Italy because of its failure to comply with the Late Payments Directive, which orders governments to reduce payment delays to no more than 60 days.
Padoan also confirmed reports that Italy might delay the privatization of 40 percent of post office operator Poste Italiane, which was planned by the end of this year.
But he said the government was considering accelerating the sale of stakes in energy companies Eni and Enel in order to keep the revenues from its privatization plans on track. Italy is aiming to raise 8-10 billion euros from privatizations over the next two years to help cut its public debt.
In other remarks, Padoan ruled out that Italy would have to adopt additional budget correction measures for this year, even though most projections for economic growth are well below the government's official 0.8 percent forecast.
Italy's budget deficit will come in below the European Union's ceiling of 3 percent of gross domestic product, Padoan said, indicating this would be enough to avoid any mini-budget even if the deficit exceeds Italy's official 2.6 percent target.
Speaking ahead of a meeting of EU finance ministers next week, the first since Italy assumed the six-month rotating presidency of the EU this month, Padoan said governments were still negotiating over how to grant more budget flexibility to countries carrying out structural reforms.
One sticking point had been a lack of agreement over the effect that certain reforms had on economic growth and over what time frame, he said, adding that until consensus was found over such technical issues it would be difficult to make progress.
"It's clear that if we can't agree over how long a meter is then we are not going to get very far," Padoan said.
He said it was "useless to deny" that there had also been an attitude of suspicion among EU politicians over why the issue of budget flexibility was now being debated, but that ministers now recognized the need to "take the suspicion off the table."
($1 = 0.7331 Euros)
(Editing by Mark Potter)