Italy to issue extra 10 billion euros of debt in 2013 - source

Reuters

MILAN (Reuters) - Italy will issue an additional 10 billion euros (8 billion pounds) of debt this year to fund the payment of overdue state bills to private businesses, an economy ministry source told Reuters on Friday.

That will raise Italy's total debt issuance target for this year to around 460 billion euros from 450 billion euros currently.

"The payment of the 10 billion euros in debt arrears will be funded through the issuance of new debt," the source said, speaking on condition of anonymity.

In April, Italy had already hiked its 2013 funding target to just over 450 billion euros following a pledge by the state to pay back 20 billion euros in arrears to cash-strapped private companies this year.

At a cabinet meeting this week it increased the size of arrears to be paid back in 2013 by a further 10 billion euros.

The source said the additional issuance will increase the debt to GDP ratio for this year, which is already expected to exceed 130 percent, but will have no impact on the fiscal deficit.

"There'll be no repercussion on the deficit-to-GDP ratio," the source said.

The euro zone's third biggest economy is under pressure to stick to a pledge to keep its deficit within the European Union's limit of three percent of gross domestic product this year, particularly after the government scrapped an unpopular housing tax on primary residences on Wednesday.

(Reporting by Luca Trogni, writing by Silvia Aloisi; Editing by Ruth Pitchford)

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