WRITTEN QUESTION P-0312/98 by Karla Peijs (PPE) to the Commission (10 February 1998)

Subject: Spending commitments in Italian Government finances

In the Netherlands Second Chamber the following questions were put to the Dutch Finance Minister. Will the Commission also answer these questions with a view to ensuring the greatest possible objectivity in relation to Italy's position?

1. Is the Commission aware of reports concerning the build-up of unspent budgetary carry-overs (the so-called 'residui passivi') in Italian Government finances, involving expenditure authorized by parliament to which the Finance Minister has apparently allocated no or reduced cash resources ((Financial Times, 16 December 1997. ))?

2. Is it true that at the end of 1997 the 'residui passivi' amounted to some 10% of GDP?

3. Does the Commission share the view that building up spending commitments in this way increases the risk of a rise in expenditure that will be difficult to control in the future?

4. Is the existence of 'residui passivi' a relevant factor in admission to EMU?

5. Is the Commission also aware of the sale of 540 tonnes of gold by the Italian Reserve Management Bureau to the Bank of Italy ((Reuters, 11 December 1997. ))?

Answer given by Mr de Silguy on behalf of the Commission (16 March 1998)

In the Italian budgetary procedures, the Parliament allocates funds on both a commitment and a cash basis. Budget appropriations are typically higher than what the administration actually spends. Funds that are not used in the year, the so-called 'residui passivi', can be carried over to following exercises. Each year, the sum of the new appropriations plus the residuals from the previous years represents the 'spending potential' of each ministry, local authority or state agency. On the basis of this 'spending potential' each institution may require the crediting of funds from the Treasury, up to the cash ceiling fixed by the Parliament. Funds are then transferred to the current accounts of the relevant institution and held as ready-to-be-spent liquidity.

In 1997, the Parliament imposed strict limits to the cash budget and to the use of Treasury funds. As a result, the existing liquidity reserves of many government agencies were absorbed, but the size of unspent appropriations, the 'residui passivi' grew significantly. According to provisional estimates, their amount, cumulated over many years in which actual expenditure remained below budgetary appropriations, might have reached around 10% of gross domestic product (GDP) at the end of 1997.

The existence of the 'residui passivi' does not represent a danger for future expenditure, as long as the Parliament maintains limits to the cash budget which are consistent with its overall budgetary targets. This is indeed the approach which has been decided for the next three years with the budget law for 1998. In addition, the Italian government is presently designing new legislation which fixes limits to the proportion of 'residui passivi' that can be carried over to the following year and cancels part of the existing stock.

The Commission will present an assessment of the sustainability of the Italian budgetary position, as well as that of other Member States, in its report on convergence, in accordance with Article 109j(1) EC Treaty, to be released by 25 March 1998.

The issue of the taxes paid on a transaction of gold from the 'Ufficio Italiano Cambi' to the 'Banca d'Italia' is covered in the answer to the Written Question P-0311/98 by Ms. J.R.H. Maij-Weggen ((See page 164. )).