Tax row escalates amid economy minister's threat to quit
Saccomanni won't stay if govt fails to respect budget pledges23 September, 16:40
(By Paul Virgo) (ANSA) - Rome, September 23 - Economy Minister Fabrizio Saccomanni's threat to quit at the weekend if the government fails to respect its budget pledges to the European Union has failed to stop demands that he avert a dreaded rise in value added tax (VAT) scheduled to kick in next week.
Saccomanni said in an interview with daily newspaper Corriere della Sera that "promises must be kept or I'm not staying".
The former Bank of Italy director general, who is not aligned to a political party, faces a tough challenge of trying keep Italy's deficit-to-GDP ratio under the 3% threshold allowed by the EU while satisfying the demands made by the parties supporting Premier Enrico Letta's left-right government.
Last week the government vowed to take action after it forecast that the deficit for this year was on course to come in at 3.1%, after rolling back an unpopular property tax called IMU to stop ex-premier Silvio Berlusconi's People of Freedom (PdL) party sinking the executive.
The PdL and Letta's centre-right Democratic Party (PD) are also demanding Saccomanni find the money within the tight budget to avert the 1% rise in the top band of VAT at the start of October, which would take it from 21% to 22%, amid fears it will depress consumer spending as Italy tries to emerge from its longest recession in over two decades. The minister also needs to find around 1.6 billion euros in revenue to stop the deficit going over 3% or Italy faces the risk of a new excessive-deficit procedure being opened by the European Commission just months after one was closed.
"We have to respect our commitments with the EU," Saccomani said Sunday. "I'm doing my duty as minister, but I think the time has come for a serene, calm debate about the public finances". But senior PdL members said averting the VAT rise should not be so hard.
"We suggested possible coverage of 10.5 billion euros and he just has to choose from within this," PdL Senator Maurizio Gasparri, a former minister, said Monday.
"If Saccomanni does not move in this direction, he'll be going against the policies of the government that were debated in parliament, which Letta presented and which Letta intends to apply". Letta's grand-coalition government is weak and in danger of collapsing in the fallout of last month's decision by the supreme court to uphold a tax-fraud conviction against centre-right leader Berlusconi.
"I'm not going on a desperate search to find a billion (euros to stop the VAT rise) if we're going to return to the ballot box in February," Saccomanni said. "It'll all be for no use, if the election campaign has already begun". Letta expressed solidarity with his economy minister, with sources in his office saying his and Saccomanni's positions were in harmony.
PD Secretary Guglielmo Epifani said Saccomanni had the "confidence" of the biggest party in parliament, but also stressed that he had to deliver "fairness and great social justice" as well as budget discipline.
Many in the PdL called Saccomanni's bluff, saying he should quit if he wanted too, even though this could alarm the money markets and cause Italy's borrowing costs to rise. Gasparri even suggested Letta could take Saccomanni's place and act as interim economy minister while continuing to lead the government.
Two of Italy's biggest business associations, meanwhile, expressed contradictory messages on Monday about how important it is to avert the VAT rise. Giorgio Squinzi, the head of industrial employers' confederation Confindustria, said it was "not the priority", adding that he thought the government should give utmost importance to cutting labour taxes.
He said this would "give a greater impulse to reviving the economy". But retailers association Confcommercio did not agree, saying the rise would further depress consumer spending as Italy tries to emerge from its longest recession in over two decades.
"The recessive, depressive effects of an eventual increase in VAT are certain," said Confcommercio. "We already saw it in the dramatic year of 2012 after an increase in the band from 20% to 21%. "It is equally clear that the necessary money (to avert the hike) can and must be found via a more courageous, determined attitude regarding cuts to public spending, which have been very timid up to now".
Junior Economy Minster Stefano Fassina, a PD member, has suggested wealthy owners of high value properties should still have to pay IMU on their homes to raise the money to avert the VAT rise.