Italy seeks to plug budget shortfall, pre-fund for 2014
MILAN, Sept 11 (Reuters) - Italy will issue more debt than previously thought in 2013 to finance a larger-than-expected state borrowing requirement, pay outstanding bills to firms and pre-fund itself for 2014, a parliamentary meeting transcript showed.
The Senate budget committee on Tuesday approved a request by Italy's Treasury to raise the ceiling on this year's net debt issuance to 98 billion euros ($130 billion) from 80 billion euros.
Italy will use part of the funds to finance larger-than-planned payments of overdue state bills to private firms, a measure that analysts expect will benefit the economy.
But larger proceeds from debt sales will also provide the Treasury with the cash needed to deal with "developments seen in the state sector borrowing requirement (SSBR) in recent months", junior treasury minister Alberto Giorgetti told Tuesday's meeting.
Data this month showed Italy's SSBR totalled a cumulative 60 billion euros for January to August, almost double the 33 billion euro deficit in the same period of 2012.
Higher planned issuance also "aims to provide a margin for public finances in early 2014, avoiding the risk of excessive tensions at auctions held in that same period," Giorgetti said, according to the transcript published on the Senate's website.
The higher issuance will further push up Italy's debt pile, the world's fourth-largest, projected at 130 percent of output at the end of the year.
The extra supply is seen weighing on Italian government bonds, already under pressure due to domestic political turmoil over the political future of former premier Silvio Berlusconi. .
On Wednesday, Italy paid more than it had since last December to sell one-year debt at auction as investors fretted about the risk of a political crisis. The Treasury returns to the market on Thursday, offering up to 7.5 billion euros in bonds.
Italy's 10-year yields stood at 4.53 percent on Wednesday, slightly above the 4.50 percent level of fellow euro zone struggler Spain. Italian benchmark yields rose above Spanish ones on Tuesday for the first time since March 2012
The need for a higher issuance ceiling also reflects the impact on public finances of a worse-than-forecast economic contraction and a costly political compromise in Italy's left-right coalition to scrap an unpopular property tax.
Economy Minister Fabrizio Saccomanni said on Wednesday Italy would keep its budget deficit - a slightly different measure from the SSBR - under the European Union's limit of 3 percent of output this year.
Twenty-seven billion euros in payments of arrears owed by the state and scheduled for this year have an impact on Italy's debt but not on its deficit. Another 20 billion euros will be paid in 2014. ($1 = 0.7538 euros)
(Reporting by Valentina Za and Giuseppe Fonte; editing by Stephen Nisbet,)