(ANSA) - Rome, October 27 - Italy will take measures to
reduce its structural budget deficit by 0.3% of GDP in 2015,
Economy Minister Pier Carlo Padoan wrote Monday in a response to
a letter from EU Economic Affairs Commissioner Jyrki Katainen
asking for clarification on next year's budget plan, ANSA
sources said.
Premier Matteo Renzi's government had initially said it
would reduce the structural deficit by just 0.1% next year after
presenting a budget featuring 18 billion euros in tax cuts as
part of an effort to revive the recession-battered Italian
economy.
But a letter Katainen sent Rome last week said the original
budget plan would lead to a "deviation" from Italy's medium-term
adjustment targets in breach of the EU Growth and Stability
Pact.
Renzi reached an agreement to up the deficit reduction at
last week's European Union summit in Brussels - a compromise
solution with the European Commission, which reportedly wanted a
cut of around 0.5%.
Padoan said the measures to reduce the structural deficit
by 0.3% of GDP in 2015 will amount to 4.5 billion euros.
Of those, 3.3 billion euros would be taken from funding
previously allocated for tax cuts, 0.5 billion would come from
EU co-financing funds and 0.73 billion would come from an
extension of the reverse charge VAT on imported goods and
services.
However, the government said Italy must be prevented from
enduring a "fourth year of recession".
"Italy's GDP has fallen over 9% on its 2008 level," read
the letter by Padoan. "The economy is in its third year of
recession and there is a serious risk of stagnation and
deflation. A fourth year of recession must be avoided at all
costs".
The EC said in response that it "welcomed Italy's
constructive cooperation". A spokesperson for Katainen stressed
that "consultations are still taking place", adding that "only
the assessment of countries with serious deviations" from EU
budget rules will be made public Wednesday.
The Renzi government's 2015 budget will total 36.2 billion
euros, the economy ministry said late Friday. Of that, 25.8
billion euros are covered by revenue and 10.4 billion euros are
covered by deficit spending.
The budget has 18 billion euros in tax cuts and 15 billion
euros in spending cuts. This includes abolishing the labour-tax
component of regional business tax IRAP, and scrapping social
contributions for new workers hired on open-ended contracts for
their first three years with a company up to a limit of some
8,000 euros a year.
As well, the budget would give families with children born
or adopted between 2015 and 2018 an 80-euro monthly bonus. It
will be available to families with income of up to 90,000 euros
a year, but all families with five or more kids will be able to
apply for it no matter what their income.
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