Italy parliament approves delay in balancing budget

By Gavin Jones ROME (Reuters) - Italy's parliament approved slower debt reduction and a delay in balancing the public budget on Thursday in a vote on the government's multi-year economic forecasts. The document outlining the assumptions, which must be approved by the European Commission, raises the target for Italy's huge public debt, the second largest in the euro zone after Greece's, to 134.9 percent of output this year from 132.8 percent previously. It raises next year's goal to 133.3 percent from 129.4 percent, this year's fiscal deficit to 2.6 percent of output from 2.5 percent, and next year's deficit to 1.8 percent from 1.6 percent. But the aspect of the government's plans which may prove most contentious with Brussels is a delay from 2014 to 2015 in achieving a balanced budget in "structural" terms. The structural budget balance is an attempt to calculate what the headline balance would be without the effects of the business cycle and one-off factors. Italy promised but failed to achieve a structural balanced budget - in which the structural deficit must not exceed 0.5 percent of output - in 2013. The structural deficit came in at 0.8 percent. Last autumn, the European Commmission told Italy to meet the target this year, but the DEF raises the 2014 target from 0.3 percent to 0.6 percent, just outside the accepted room for manoeuvre. Economy Minister Pier Carlo Padoan said the change was necessary because Italy's fledgling economic recovery is "fragile" and needs support from fiscal policy. He has written a formal letter to the Commission informing it of the delay. The Chamber of Deputies passed the Economic and Forecasting Document (DEF), which was presented by Matteo Renzi's government last week, by 348 votes to 143. The upper house Senate had approved the plan earlier in the day by 156 to 92. The structural budget is a complicated calculation involving estimates of countries' economic growth potential and their rates of structural unemployment, below which inflation will start to rise. In 2012, Italy amended its constitution to include the provision that the budget must always be balanced in structural terms. This can be waived, as in the case of this year's DEF, by a vote in parliament. Italy normally misses its fiscal targets. When it joined the euro in 1999, it promised to balance its budget in 2003 and pledged to bring its public debt below 100 percent in the same year. It is not the only country looking for some leeway in meeting its targets. France has won backing from the European Union to "slightly" slow the pace at which it will reduce its public deficit, the French finance minister, Michel Sapin said on Thursday. (Reporting by Gavin Jones; Editing by Larry King/Ruth Pitchford)