Italy's public deficit will be 2.0 per cent of gross domestic product (GDP) this year, Prime Minister Mario Monti said on Wednesday, considerably worse than the previous estimate of 1.3 per cent.

"Italy will have a deficit of around 2.0 per cent this year," Monti said following talks with German Chancellor Angela Merkel. The deficit was 3.9 per cent in 2011 and Italy aims to cut it to 0.5 per cent next year.

Monti said the figure would still be around half the EU average.

The official data agency Istat said earlier that Italy's deficit numbers were up because of increased debt interest payments due to higher borrowing costs on the markets and because of lower tax revenues due to the recession.

Monti also said that Italy would return next year to a primary surplus, when revenue and spending are set against each other before debt interest payments.

channelnewsasia.com