Italy to pay €40 bn owed to business to boost growth

The Italian government on Saturday gave its go-ahead for a bill to repay 40 billion euros ($52 billion) in debts owed to the private sector over the next 12 months in a bid to stimulate growth.

“The cabinet meeting today approved an urgent decree to pay back the debts of the public sector to the private sector,” Prime Minister Mario Monti told a press conference after the talks.

The bill had been eagerly awaited by Italy’s business community under pressure from the longest post-war recession in the eurozone’s third largest economy and a lack of available credit from banks.

Finance Minister Vittorio Grilli said the payments could begin as early as Monday.

Monti said total debts were 80 billion euros at the end of 2011 and that banks estimated they had since risen to more than 100 billion euros.

“This means costs for businesses and for the whole country. It is an unacceptable situation that has taken on ever greater dimensions,” Monti said.

The interim prime minister, who is in charge awaiting the formation of a new government following elections in February, said the payments would not breach the threshold of 3.0 percent mandated by the European Union.

Monti stressed that the approval of the draft bill did not mean that his government had plans to stay in charge for longer, adding that Saturday’s cabinet meeting “could be the last one”.

The elections yielded no clear winner and the main political forces — Pier Luigi Bersani’s centre-left, Silvio Berlusconi’s centre-right and a new protest party — have failed to find an agreement to form a new government.

The economy is forecast to shrink by 1.3 percent this year, although government officials have said the result could be even worse.