Experts at the economy ministry
and the premier's office have freed up some 1.6 billion euros in
extra funding for the measures in the executive's economic and
financial document (DEF), government sources said Friday.
Premier Matteo Renzi wants the extra funding - which his
office is calling a "bonus" - to be allocated to welfare
spending, reportedly via special decree.
Economy Minister Pier Carlo Padoan and his team have
liberated the extra funding through a kind of "reverse deficit
adjustment", thanks to new European Union rules on budget
flexibility.
Under the new rules, which Italy pushed for during its
six-month duty presidency last year, countries with struggling
economies that are engaging in structural reform are accorded
room to maneuver their way out of austerity and recession, even
if the measures increase their deficits.
Accordingly, Padoan decided to let this year's national
deficit float up to 2.6% of GDP instead of the 2.5% forecast if
the government did nothing.
That percentile point freed up 1.6 billion euros.
In 2016, the deficit is projected at 1.4% but the
government will reportedly choose to increase it to 1.8% -
meaning that next year's "bonus" will amount to 6.5 billion
euros.
Padoan foreshadowed his strategy in recent remarks to
parliament, when he said "an expansive DEF" was on the way and
that "the watchwords are fewer taxes and more jobs".
"Social spending is off limits (from spending cuts) and
must be increased," the minister said.
The government is betting that its combination of welfare
spending, labour reforms, and tax incentives for employers who
take on new hires - in conjunction with the European Central
Bank's quantitative easing (QE) bond-buying program, a weaker
euro and falling oil prices - will jumpstart Italy's economy.
On the other side of the fence, CGIL union federation
leader Susanna Camusso said the DEF fails to tackle Italy's key
problem, which is the lack of jobs.
"Employment is what will generate wealth," Camusso said.
"The DEF as far as we can tell right now, fails to address
the country's central issue, which is how to create jobs, how to
invest in job creation".
The leader of what is the largest and most leftwing of
Italy's "big three" trade union federations added that the
government's labor policies "encourage unlawful behaviors more
than positive ones".
This was a reference to Renzi's signature Jobs Act labour
reform, which scaled back job protections while giving potential
employers tax breaks for new hires.
Camusso also took a wait-and-see attitude to the
government's promise of allocating 1.5 billion euros to welfare.
"This is a case of let's see what the DEF actually says, and
then we'll comment on the sudden bounty," she said.
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