##ing, increase the amount of resources allocated to productive expenditure and reduce the tax burden, and make room for manoeuvre during cyclical downturns. belgium has reduced its public debt from 122 per cent of gdp in 1997 to 89 per cent in 2006, with very considerable savings in interest payments. major factors in the consolidation of the public finances were the introduction of rules making regional and local governments accountable and the institution of an independent authority ( including representatives of central and regional governments and the central bank ) that sets budgetary targets for all levels of government and reports any overshoots in the course of the year. finally, by law any extra revenue with respect to forecasts must go entirely to reducing the debt. other european countries, some with significantly lower public debt than italy ’ s, have kept their budgets near balance or in surplus since the establishment of monetary union, among other things so as to be in a position to face the problems deriving from the ageing of the population. the planning document reaffirms the importance of controlling the quality and quantity of public spending in order to reconcile the adjustment of the public finances with a lowering of the fiscal burden, which is now near the highest levels registered in recent decades. according to the planning document ’ s macroeconomic framework, achieving a balanced budget in 2011 without increasing taxes or decreasing investment with respect to the budget on a current legislation basis requires that the ratio of primary expenditure to gdp fall by nearly 3 percentage points between 2008 and 2011, with an average annual reduction of outlays equal to 0. 5 per cent in real terms, in contrast with an average annual increase of 2. 3 per cent over the past decade. according to the data provided by the planning document, on the basis of current legislation the ratio of primary expenditure to gdp is expected to decline by 0. 2 percentage points in 2008. based on unchanged policies, it would rise by several tenths of a point. other european countries have managed to reduce their budget deficits in recent years acting on the level and composition of spending. in germany, for instance, the ratio of primary expenditure to gdp decreased from 45. 5 per cent in 2003 to 42. 9 per cent in 2006, lower than in italy. this made it possible to reduce both the deficit, from 4 to 1. 7 per cent of gdp, and tax revenue. assuming unchanged policies, budget balance will be achieved in 2008. the reduction in expenditure has been concentrated in the areas of social benefits,

2. 5 percentage points a year from 2008 through 2011 ( 1. 9 points in 2008, 3. 3 points in 2011 ). in 2010, for the first time since 1991, the debt is expected to fall below 100 per cent of gdp. in the december stability programme this result was forecast for 2011. the earlier achievement of this objective depends largely on the faster growth of nominal gdp now forecast for the three years 2007 - 09 ( an average of nearly 1 percentage point more per year ). the downward trend in debt also benefits from the assumption that from 2007 onwards the borrowing requirement will be approximately equal to net borrowing. however, excluding the two extraordinary charges included in net borrowing, in 2006 the gap between the two aggregates was equal to 1. 2 per cent of gdp. the planning document estimates an increase of 0. 3 percentage points in the ratio of interest payments to gdp in 2006 and 2007 after it had fallen constantly for a decade. for the subsequent years, according to the planning scenario, the ratio will hold stable at just below 5 per cent, reflecting the expected decline in the debt ratio on the one hand and the progressive rise in interest rates on the other. 2. 2 budgetary policy for 2008 according to the planning document, in 2008 the deficit will fall by 0. 3 percentage points, to 2. 2 per cent of gdp, and the primary surplus rise from 2. 3 to 2. 7 per cent. achieving this objective does not require corrective measures with respect to the projections based on the “ current legislation ” framework ( supplemented by the additional spending provided for by the decree law presented together with the planning document ). nevertheless, for purposes of greater transparency, the planning document observes that the deficit on a current legislation basis excludes some costs that do not derive from obligations under the law but that are very likely to arise. the planning document cites three classes of expenditure in decreasing order of obligation : those connected with commitments made by the government, those bound to established practices such as appropriations for future labour contracts and for the national road agency and the state railways, and lastly those in connection with new initiatives. the planning document puts expenditures for commitments already made at €4. 1 billion and gives rough estimates of the second and third classes of respectively €l7. 2 billion ( not counting the resources for the renewal of public employment contracts, still to be determined ) and €10 billion. including the first two classes of outlays for a total of over €11 billion gives an