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Govt puts contested budget bill to confidence vote

Letta hits back as package continues to come under fire

19 December, 18:18
Govt puts contested budget bill to confidence vote (By Paul Virgo) (see related story on recession) (ANSA) - Rome, December 19 - Premier Enrico Letta's government said Thursday that its contested 2014 budget package will be put to a confidence vote in the Lower House. Confidence votes are often used to speed the passage of legislation, as they limit the scope for amendments.

There is a risk though, as Letta's left-right coalition government will fall if it loses the vote set to take place on Friday. The bill needs to be approved by both houses of parliament by the end of the year. It is set to be put to another confidence vote in the Senate, where the executive has a smaller majority, for final approval on Monday.

The package has come under heavy fire, with business associations, trade unions and opposition parties saying it fails to do enough to revive the recession-battered Italian economy and is too timid with cuts to labour and income taxes.

Industrial employers confederation Confindustria said in a report on Friday that the effect of the budget package would be "very small" as its effects would only provide a boost of 0.1% or 0.2% of Italy's gross domestic product in 2014.

Italy ended a run of eight consecutive quarters of negative growth in the July-September period, when GDP was flat with respect to the previous three months, and it is forecast to return to positive growth in the final quarter of this year.

Letta hit back at the criticism on Friday, pointing out that his government has to ensure the budget deficit-to-GDP ratio remains within the 3% threshold allowed by the EU and act to reduce Italy's huge public debt.

"I have the responsibility to keep the Italy boat steady," said Letta, a member of the centre-left Democratic Party (PD), ahead of a European Union summit in Brussels.

"I want tools for growth, without wrecking the accounts".

Unemployment has risen to record levels of over 12%, with more than four in 10 under 25s out of work, during the country's longest post-war recession.

The budget package also came under fire from the European Commission (EC) Friday for the so-called Web tax it contains. Emer Traynor, spokeswoman for EU Taxation Commissioner Algirdas Semeta, said the measure risked breaching EU law in its current form.

The Web tax aims to force companies that advertise products over the Internet in Italy to do so only through companies that have a registered tax presence in the nation. It was changed earlier this week to exclude taxes on the sale of goods online following complaints about the plan, leaving the law applicable to advertising only. Therefore companies like Amazon would not be harmed significantly by the measure, though ones like Google, Yahoo, and Facebook would likely face higher taxes locally. Letta has promised that a portion of future savings, which the government is confident it will find from a planned review of public spending as well as a crackdown on tax evasion, will be used to further reduce taxes on labour. The package includes cuts to the top level of pensions and proposes some new local taxes grouped together as the IUC to replace the IMU property tax, which was scrapped on primary residences earlier this year.

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