Domenica, 21 Ottobre 2018

Govt will fall if IMU not scrapped PdL insists


(By Denis Greenan).
Rome, May 3 - Silvio Berlusconi's People of Freedom
(PdL) party on Friday insisted Italy's fledgling left-right
government would fall unless Premier Enrico Letta meets a PdL
election pledge to scrap and refund an unpopular property tax
called IMU.
"It is a government accord, unless IMU is cancelled starting
in June and unless the proceeds from 2012 are repaid, the
government is no more," said PdL House Whip Renato Brunetta, a
former finance minister.
Brunetta said "the resources will be found" to cover the big
hole in the budget punched by eliminating and paying back IMU.
IMU, which is widely reviled, has become a hot-button issue
and appears ever more likely the make-or-break problem for
centre-left Premier Letta.
On Thursday the Organisation for Economic Co-operation and
Development (OECD) warned the Italian government to be braced to
take action on its deficit and said getting rid of IMU should
not be a priority.
The club for wealthy western countries said Letta's
government will need to introduce corrective budget measures if,
as the OECD predicts, the country's deficit-to-GDP ratio fails
to fall below 3%.
Rome is hoping this month to convince the European
Commission that it has got the deficit below the 3% threshold
allowed by the EU so that it ends an excessive-deficit procedure
against the recession-hit country.
On Friday the EC brought some cheer by saying the deficit
would be 2.9% of GDP this year, as forecast by the Italian
government, and 2.4% next.
The OECD, by contrast, said Thursday it would be 3% of GDP
this year.
Economy Minister Fabrizio Saccomanni said the OECD's
figures did not take account of the positive effect of the
government's plan to repay 40 billion euros that the public
sector owes private firms over the next 12 months.
Saccomanni added that he was still confident the European
Commission would end an excessive-deficit procedure, "an
important signal for the financial markets".
EC President Jose' Manuel Barroso said he was "very
confident that Italy will emerge from the excessive-deficit
procedure," after meeting Letta in Brussels Thursday.
The OECD report praised the "ambitious programme of
reforms" launched last year by the emergency technocrat
administration of Letta's predecessor, Mario Monti.
It said the country could emerge from its longest recession
in two decades later in 2013 as the reforms "have reduced the
risks of economic slowdown and could help Italy emerge from the
recession in 2013".
But it revised down its gross domestic product forecast for
this year, saying in the report that it expected Italy to post
negative growth of 1.5%.
This was 0.5% worse than the OECD predicted in its November
It said Italy should return to growth in 2014, forecasting
a 0.5% rise in GDP next year.
The OECD also warned that Letta's government must implement
Monti's reforms aimed at boosting growth - including
controversial measures to make the labour market more flexible
by making it easier for firms to dismiss workers.
"Key 2012 reforms aimed at improving the dynamism of labour
and product markets must be implemented effectively," read a
summary of the report.
"This will improve Italy's persistently weak productivity
and boost the country's international competitiveness".
It added that Letta's government should continue with
Monti's efforts to restore health to Italy's public finances.
"Maintaining fiscal consolidation is key to putting Italy's
debt-to-GDP ratio on a downward path over the medium term,"
added the summary.
"Budgetary measures should concentrate on permanent
spending cuts to avoid (increasing) already high levels of
The OECD also forecast on Thursday that Italy's massive
public debt will rise to 134% of GDP next year.
The report said reducing this was a priority because
otherwise the country would "remain exposed to sudden changes in
the mood of the financial markets".
But the organisation irked the PdL by saying scrapping
IMU "should not be a priority" for the new government despite
its survival apparently depending on this.
Letta, a member of the centre-left Democratic Party (PD)
that had been in bitter combat with the PdL for two decades
before an inconclusive February election result forced them to
form an unnatural alliance, has said that June's IMU payments
would be suspended as part of a review of the tax.
But he has not promised to abolish it completely.
"If the priorities are growth and jobs, the first thing to
cut is labour taxes," OECD Chief Economist Pier Carlo Padoan
told a press conference.
"Reducing labour taxes is more important than reducing
IMU was instituted among a series of austerity measures
under Monti's emergency government to restore health to Italy's
public finances.
Abolishing IMU and reimbursing the 2012 revenues from it
would create a hole of around eight billion euros in this year's
But Brunetta and his PdL colleagues argue that this is "a
drop in the ocean" compared to the estimated 140 billion euros
Italy generates in tax revenues.
Reducing labour taxes is seen by many as a good way to
promote job creation, with almost three million Italians
unemployed and close to four in 10 young people on the dole.

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