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Italy debt to reach peak of 130.4% in 2013


Italy's public debt level will reach a peak of 130.4 percent of gross domestic product (GDP) this year, according to a long-term budget programme issued on Wednesday that forecasts growth will pick up and debt go down starting from next year.

The programme was adopted by the cabinet but will have to be amended by the next government, even though political parties have so far failed to strike a deal to end a deadlock that has dragged on since inconclusive elections on February 24-25.

It forecasts an economic contraction of 1.3 percent this year, following by growth of 1.3 percent in 2014 and 1.4 percent in 2015.

The public deficit is set to narrow to 2.9 percent this year, 1.8 percent in 2014 and 1.5 percent in 2015.

The debt level will rise to a peak of 130.4 percent this year and then gradually fall to 129 percent in 2014 and 125.5 percent in 2015.

Interim Prime Minister Mario Monti underlined that the document takes into account the "particular situation" that Italy has been in since polls in which the centre-left won the most votes but failed to win a parliamentary majority.

"We could define this as a work in progress," Monti told reporters after the cabinet meeting.

The former European commissioner warned Italy faces a major challenge over the next few years and urged any future government "to remain vigilant in terms of public finance discipline".

Italy has to stay under the 3.0-percent public deficit threshold mandated by the European Union, he said.