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Letta says he's no Santa Clause, budget nears approval

Package survives confidence test in House, set to move to Senate

20 December, 18:43
Letta says he's no Santa Clause, budget nears approval

(By Paul Virgo) (ANSA) - Rome, December 20 - Premier Enrico Letta said it was no use trying to be Santa Clause with the State accounts on Friday as his government's much contested budget bill survived a confidence vote in the Lower House to move towards approval.

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. Letta says the bill should be praised for presenting tax cuts, albeit modest ones, after years of austerity while keeping Italy's budget-to-deficit ratio within the 3% threshold allowed by the European Union and taking action to reduce a massive public debt of over two trillion euros. Letta said that Italy does not need "Father Christmas" handling the budget, but "a good father of a family" who makes "balanced decisions" on the public accounts that guarantee "credibility". "Everyone makes requests (of the budget) but the sum of all of them would lead to the bankruptcy of the Italian State," the premier added at the end of an EU summit in Brussels. "I take the responsibility to make the decisions".

Letta's left-right executive put the bill to confidence vote to limit the scope for amendments and speed its passage through parliament, which needs to be completed by the end of the year. The budget prevailed 350 votes in favour, 196 against and one abstention. If it had failed to win the confidence vote it would have spelled the end for the government, a coalition executive formed primarily by Letta's centre-left Democratic Party (PD) and the New Centre Right (NCD) of Deputy Premier and Interior Minister Angelino Alfano.

It is set to clear the House at another vote on Saturday and move to the Senate for final approval Monday.

The premier said there is widespread social hardship in Italy, with unemployment at record levels of over 12% as the country shows timid signs of emerging from two years of recession, the longest downturn since World War II.

But he stressed that "wrecking the accounts" would only alarm investors and cause the borrowing costs to soar on Italy's public debt, which stands at around 133% of GDP.

Italy came close to a Greek style financial meltdown in 2011, when uncertainty about the ability of the government of ex-premier Silvio Berlusconi to put the public accounts in order contributed to interest rates on 10-year bonds to climbing over 7%. On Friday Letta also responded to the association of Italian town and city councils ANCI, which on Thursday appealed to President Giorgio Napolitano to intervene, saying local governments face a collective shortfall of 1.5 billion euros due to the effects of the budget. "For the first time, this budget law gives to the councils, rather than taking away, and this should be given greater stress," Letta said.

"I call on the the councils to have an attitude of dialogue because you solve problems with dialogue". Letta said Rome will coordinate plans for a 'Web tax' with the EU after the European Commission said the measure may breach European law.

The tax featured in the budget would 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. "The Web tax needs coordination with the European rules and it's important that we've managed to have it included as one of the points the EU must address," he said. Letta has promised that a portion of future savings, which the government is confident it will find from a spending review as well as a crackdown on tax evasion, will be used to further reduce taxes on labour.

The budget also includes a new tax on municipal services to replace the unpopular IMU property tax, which was scrapped for primary residences earlier this year.