Brussels, 10/04/2014 (Agence Europe) - Unveiling his three-year finance plan for 2014 to 2016, the new Italian prime minister, Matteo Renzi, is planning to meet Italy's budget commitments to Europe.
Italy's financial and economic document (DEF) is resolutely social democrat in inspiration, bearing similarities to what has been announced in France to boost the economy (see EUROPE 11000). Cuts in taxes take pride of place, with a reduction in income tax on 1 May for ten million people on low incomes (less than €25,000 a year) will cost €6.6 billion in 2014 (€10 billion over a full tax year); and income tax will be cut by 5% in 2014 and 10% in 2015.
A detailed spending review will make cuts of €4.5 billion in public spending. The pay of the heads of big state companies will be capped, the grants for public procurement will fall by a €1 billion in 2014 and non-strategic public bodies will be closed down. Revenue from privatisation of Poste Italiane and ENI (the privatisation process began under the previous government) is expected to reach nearly €12 billion a year in 2014-2017 inclusive.
The tax cuts for individuals and companies will be financed by a rise in indirect taxation. VAT went up to 22% in October 2013 and is expected to net more than €2 billion. The tax on savings and financial products (apart from sovereign bonds) is to go up.
The DEF slightly reduces Italy's growth forecasts to 0.8% of GDP in 2014 from the 1.1% forecast by the previous government (1.3% of GDP in 2015 rather than 1.7%). The budget deficit for 2014 is expected to remain unchanged at 2.6% of GDP rather than 2.5% (1.8% of GDP in 2015 rather than 1.6%). On Wednesday, Simon O'Connor, a spokesman for the economic and monetary affairs commissioner, said Italy must balance its public accounts in structural terms in order to put its very high debt on a downward trajectory. (MB)