Renzi's economic plan wins Parliament's approval

Cabinet likely to give green light to tax-cut decree on Friday

(ANSA) - Rome, April 17 - Premier Matteo Renzi's economic blueprint was given the green light Thursday by both the Senate and the Lower House, setting the stage for cabinet approval Friday of a decree implementing the plan's high-profile income tax cuts. Those 10 billion euros in income-tax cuts, designed to target low-income earners, are among the highlights of Renzi's Economic and Financial Document (DEF) that aims to kick-start the sluggish economy.

That ambitious programme will next be sent to the European Commission along with official notice that Italy is postponing by one year the target of balancing the State's structural budget. Economy Minister Pier Carlo Padoan has explained that for Italy, "the current year is a year of change," with economic recovery still fragile, but he also maintains that reforms proposed by Renzi's government will have a significant and permanent affect on the underlying structural budget. On Thursday, Padoan told parliament that Italy's structural-budget deficit will be slashed in 2015 thanks to spending cuts, but the target of balancing the budget will not be achieved until 2016. "In 2015, the structural deficit will decrease by 0.5 of a percentage point thanks to a budget consolidation courtesy of spending reductions," Padoan told the Lower House.

Opposition members say they're concerned that Italy cannot afford to cut 10 billion euros in income taxes, as well as targeted business tax reductions. Renato Brunetta, House whip for the opposition Forza Italia party led by ex-premier Silvio Berlusconi, complained that the DEF contained errors and flawed assumptions that undermine the economic plans. But Renzi has insisted he has sufficient "cover" to finance his promises, pointing to the formal spending review led by Commissioner Carlo Cottarelli which has been going on for months, and has targeted as much as 4.5 billion euros in savings in this year alone.

Renzi's three-year DEF blueprint foresees 26 billion euros in further public-spending cuts in 2015 and 2016. Earlier in the week, the Bank of Italy also raised questions about the assumptions in the economic blueprint, including just how much in savings will actually be found. "In 2015, the expenditure savings indicated as the maximum obtainable from the spending review would not be sufficient to cover the program goals," the central bank said.

The Bank of Italy described as "ambitious" the government's target of raising the equivalent of 0.7% of Italy's gross domestic product by selling off public assets, properties and stakes in State-controlled firms. The executive hopes to raise up to 12 billion euros each year until 2017 with divestments and asset sales, which - along with spending review savings - will help to offset new spending and programs.