In the three-year National Reform Plan approved by the cabinet on Wednesday, the government said it now expects a contraction of 1.2 per cent of GDP this year, up from a previous forecast of a 0.5 per cent contraction.
The deficit target of 0.5 per cent remains compliant with the European Union's new fiscal compact rules and actually includes a 2013 "structural" budget surplus equal to 0.6 per cent of GDP, Deputy Economy Minister Vittorio Grilli said in a news conference after a cabinet meeting.
Prime Minister Mario Monti warned that his government of technical experts, which took power late last year when Italy's sovereign bond yields were soaring, were implementing reforms that would take years to bear fruit, and that would require coherent continuity by future administrations.
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