Italy plans to crack down on tax evasion

ITALIAN DEFICIT:ITALY PLANS to crack down on tax evasion and boost competitiveness as part of a plan to eliminate its deficit in 2013 and secure continued support from the European Central Bank in reducing the country's borrowing costs.

“The adjustment must be rigorous and fair,” said Emma Marcegaglia, head of employers’ association Confindustria, after a meeting with union leaders, prime minister Silvio Berlusconi and ministers.

The plan will also cut the cost of Italy’s bloated political system and include asset sales, she said.

Italian finance minister Giulio Tremonti told the meeting that the cabinet would approve the plan by August 18th. It seeks to cut the deficit to between 1.5 per cent and 1.7 per cent of gross domestic product next year before eliminating the shortfall in 2013, according to union officials who attended the talks.

The meeting came on a day when the country’s benchmark stock index plunged 6.7 per cent, with UniCredit and Intesa Sanpaolo, the country’s biggest banks, falling 9.4 per cent and 13.7 per cent respectively on concern that Italy may become the next victim of the region’s debt crisis.

Last week, Mr Berlusconi pledged to pass a balanced budget amendment to the constitution and introduce measures to spur economic growth in order to enlist ECB support in shoring up the country’s slumping bonds.

The ECB began buying Italian debt when markets opened on Monday, helping bring the yield on Italy’s 10-year bond down 99 basis points in three days.

The new measures supplement a €48 billion austerity package . – (Bloomberg)