Government says sacrifices needed to avoid 'Greece risk'

THE ITALIAN government last night approved a €24 billion austerity budget of public sector spending cuts and limited tax hikes intended to reduce Italy’s budget deficit to below 3 per cent of GDP as opposed to 5.3 per cent in 2009.

Preparing public opinion for what will obviously be an unpopular measure, cabinet under-secretary Gianni Letta said the budget would necessarily involve “tough sacrifices” in order for Italy to avoid the “Greece risk”.

Presenting the measure yesterday, finance minister Giulio Tremonti argued that this was “not just any old budget” but one which “we will all have to handle together”.

The proposals entail a fairly predictable series of measures:

* a freeze in civil service salaries;

* deferment of pensions;

* a rationalisation in health care spending;

* cuts for high-paid public service managers, for ministers and for parliamentarians;

* a crackdown on income tax evasion.

Inevitably, however, trade union leaders were not impressed. Guglielmo Epifani, leader of the CGIL trade union, argued that the budget was totally unfair. “As usual, both public and private workers are asked to come up with the biggest sacrifices whilst there are no job promotion and job investment measures. If you earn €1 million per annum, you won’t be touched, but if you are on a monthly salary of €1,500, you will suffer, as will a private sector worker who wants to go into retirement,” he said. “As far as we are concerned, this is not an equitable budget and it will have to be changed in parliament.”

Throughout the last month, the government has made much play of saying that it will “not put its hands into the pockets of Italians”, suggesting that the budget would have a relatively mild impact on the vast majority of Italians.

The leftist governor of Puglia, Nicchi Vendola, a potential future centre-left leader, argued the government had not kept its promises. “This is the biggest social slaughter in the history of the Italian state. The government tried to hide the crisis with all that rhetoric about not putting their hands in the pockets of Italians but in fact they have now stuck their fingers into the eyes of Italians . . . It is simply not acceptable to dump €24 billion of cuts on salaried workers, on pensioners and on the poor.”

One of the most controversial elements in the proposals concerns €10 billion cuts in regional budgets. The head of the Conference of Regions, Vasco Errani, argued that the cuts will have an “unsustainable” impact on citizens since they will entail drastic cutbacks in local services.

Despite union and regional opposition, there seems little danger of any Greek-style street protest by way of response.

Italy’s budget deficit compares favourably with many of its European peers, but its national debt remains high at 117 per cent, a figure that consumes 5 per cent of GDP in interest costs alone.