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Gov't budget package approved amid acrimony

Italian fiscal plan for next year passes by 167 to 110

23 December, 18:59
Gov't budget package approved amid acrimony (By Sandra Cordon) (ANSA) - Rome, December 23 - The Italian government's 2014 budget received final approval in the Senate on Monday despite acrimony over some measures in the package that also included changes worth approximately 14.7 billion euros. The budget passed in the Senate by a vote of 167 in favour and 110 opposed.

Critics charged the measures were too timid on growth while the government maintained that this was the first budget in years to lower taxes.

Business associations, trade unions and opposition parties have said that it fails to do enough to revive the recession-battered Italian economy and is too cautious with cuts to labour and income taxes.

However, Premier Enrico Letta hit back, saying he cannot be "Father Christmas" with public money and arguing that the bill should be praised for presenting tax cuts, albeit modest ones, after years of austerity.

At the same time, he added, the budget has kept Italy's budget-to-deficit ratio within the 3% threshold set by the European Union and has taken action to reduce a massive public debt of over two trillion euros.

Last-minute budget debate Monday created some acrimony about the budget's alleged shortcomings and a furore over rental agreements that cost the Lower House around 22 million euros each year.

Meanwhile, budget figures showed that higher taxes account for about 2.1 billion of the overall package.

Revenue to some areas of the budget will be cut by 6.08 trillion euros and increased in other areas by 8.212 trillion euros. The budget also included a new tax on municipal services of more than 3.7 billion euros to replace the unpopular IMU property tax, which was scrapped for primary residences earlier this year.

The premier 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, which passed a confidence vote last week in the Lower House, also included a new tax on municipal services to replace the unpopular IMU property tax, which was scrapped for primary residences earlier this year.

The association of Italian town and city councils ANCI, which last week appealed to President Giorgio Napolitano to intervene, said local governments face a collective shortfall of 1.5 billion euros due to the effects of the budget. The premier has acknowledged there is widespread social hardship in Italy, with unemployment at record levels of 12.5%, as the country has only now begun to show timid signs of emerging from the deepest recession since the Second World War.

But Letta has also 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 climbing over 7%.

Letta's left-right coalition government earlier Monday won by a healthy margin the vote on another piece of legislation, the so-called 'Save Rome' decree that featured a mix of measures including assistance for the cash-strapped capital city's council.

The animosity over the latest budget was heightened over the removal of a measure from the 'Save Rome' decree that would have enabled the House to cancel costly "golden rent" contracts it holds for offices outside the parliament building in central Rome. The Northern League and the anti-establishment 5-Star Movement had threatened to bog down the work of parliament unless the measure to scrap the contracts was reinstated.

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