Letta Budget under exam amid fears of 'dirty tricks'

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Letta Budget under exam amid fears of 'dirty tricks'

By Denis Greenan (ANSA.IT) 14:20, October 23, 2013

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Rome, October 21 - Premier Enrico Letta's 2014 budget is set to start a two-month journey through parliament Tuesday with unions up in arms over its alleged "timidity" on growth and employers warning against "dirty tricks" by the parties that make up Italy's unprecedented left-right coalition.

The budget bill, expected to undergo major tweaking before its approval by the end of the year, is a mix of spending cuts, tax cuts and revenue hikes Letta says will help the economy out of its longest recession in 20 years while keeping to EU-mandated fiscal discipline.

Italy's three big trade union confederations, CGIL, CISL and UIL, on Monday announced their members would hold four hours of strikes in protest against the bill.

The unions say the package does not do enough to boost growth and create jobs amid record unemployment and 40% of young people out of a job.

They are unhappy about a freeze on public-sector pay rises, among other things, and say cuts to income and labour taxes are too meek.

They said they are hoping the bill will be amended significantly during its passage through parliament.

Many of the changes, they said, should be based on union proposals for cutting costs and reducing government bloat at all levels.

The unions said the strikes and related demonstrations would take place between now and the middle of November.

Employers, too, want to see stronger moves to inject more life into an economy that is showing flittering signs of picking up.

But despite its shortcomings, the budget bill should be moved quickly through parliament without any "dirty tricks," the president of the country's association of big business said.

"There is great concern that in the transition from bill to law...(there may be) the usual dirty tricks...with which we have had extensive experience in the past," said Giorgio Squinzi, head of Confindustria.

"I hope that this does not happen," Squinzi said, voicing fears of another recurrence of what Italian media have traditionally called "the attack on the stagecoach" by parties aiming to please their elctoral base. The budget bill features a 27.3-billion-euro adjustment in the public finances, including spending cuts over the 2014-2016 period, with about 11.6 billion euros of adjustments falling next year.

Squinzi has been critical of the budget, which includes a plan for government privatizations to help reduce the public debt, while income and labour taxes are to be cut.

"The steps are in the right direction, but once again they are not enough to make us recover growth," Squinzi said.

Industry Minister Flavio Zanonato responded by promising that "parliament will improve it".

Ex-premier Silvio Berlusconi's People of Freedom (PdL) party said it would not vote for the bill in its present form because there is a reincarnation of a property tax which Berlusconi campaigned vigorously to abolish.

But 24 PdL Senators signalled fresh strains in the centre-right party by calling for less criticism of the government, which is an unnatural and an uneasy alliance with their traditional foes in Letta's centre-left Democratic Party (PD).

The PdL came to the brink of splitting when Berlusconi was forced into an embarrassing U-turn on an October 3 confidence vote against Letta when senior PdL figures, including its five ministers, said they would not support his attempt to sink the government because of the PD's insistence on applying an anti-corruption law to remove the media magnate from the Senate on a tax-fraud conviction.

The PD has also voiced disappointment in the bill and especially in the lower-than-expected cuts to payroll taxes after years in which real incomes have sunk.

On Monday senior PD members said the bill should be improved as long as its "general framework" was preserved, while Letta said it created the conditions to start revving up the economy while cutting debt "for the first time in five years".

Letta, who has grown in stature with his calm stewardship of the unruly coalition and scored a major coup with the confidence-vote win, stressed that it was time politicians "learned to say No".

For the first time this year, the budget must undergo vetting by the European Union which can, under its Stability Pact, demand changes if it thinks it may breach strict rules on curbing deficits and cutting debt.

EU experts were poised to start going through the fine print to make sure there are no holes that would put it in danger of overshooting the mandatory 3%-to-GDP budget threshold.

Eurostat, the European Union's statistics office, on Monday confirmed that Italy's deficit-to-GDP ratio for 2012 was 3%. The EU in May closed an excessive-deficit procedure it opened in 2009 after Rome reined in its budget.

The government recently approved a mini-budget to get the deficit for this year back within the 3% allowed by the EU after admitting it had been on course to finish the year at 3.1%.

The latest set of economic figures released Monday fuelled hopes the economy is finally beginning to turn the corner.

Industrial turnover and orders showed signs of a recovery in August, when increases on the previous month were registered, although the year-on-year figures continued to be negative.

National statistics agency Istat said industrial turnover was up 1% in August with respect to July, but it was 4.8% down on the same month in 2012 - the 20th consecutive year-on-year drop.

After two months of falls, industrial orders were up 2% in August with respect to July.

But orders were down 6.8% on August 2012, according to data not adjusted for seasonal factors - the 10th consecutive year-on-year drop.