COMBINED REPORT ON THE ECONOMY AND PUBLIC FINANCE

Comment on the Economic and Financial Outlook

The good economic and financial results achieved for 2006 and the positive assessment of Italy's 2007 Budget Law expressed by the European Union, the International Monetary Fund and the markets, confirm that the public accounts' emergency in our country has finally come to an end. At the same time, however, many are induced into believing that the constraints limiting Government action have also disappeared, and that resources have suddenly become copious enough to enable the Government to engage in large public expenditure increases and rapid tax reductions. Compared to one year ago, the challenge has shifted from that of seeking to avoid an impending threat to that of managing a success. So as to ensure wise action, it is pivotal that the debate on economic and financial policies remain anchored to reality and based on long-term views. Available resources and potential new initiatives need to be simultaneously evaluated in light of accurate estimates both of public finances and the overall economic situation. We must not allow an averted danger to turn into a missed opportunity.

These are the reasons that led me to bring forward the traditional release of the report on economic and public accounts developments and forecasts. Thus, the Relazione Trimestrale di Cassa and the Aggiornamento alla Relazione Previsionale e

Programmatica are unified into a single document, jointly produced by the various departments within our Ministry. The present introduction adds to the analysis provided in the rest of the document by dealing, item by item, with a few core issues.