New Italian PM Suspends €6 Billion In Planned Tax Rises

Italy’s new government, led by Prime Minister Enrico Letta, have vowed to reverse Rome’s era of austerity, beginning with the cancelation of an unpopular tax hike on primary residences due in June and pledging not to raise the sales tax while reducing some payroll taxes.

Letta, who won his first vote of confidence in parliament on Monday by 453 votes to 153, said that Italy could ill afford to focus simply on cutting its public debt, but rather needed a new emphasis on lifting the economy out of recession.

Italy’s new government, led by Prime Minister Enrico Letta, have vowed to reverse Rome’s era of austerity, beginning with the cancelation of an unpopular tax hike on primary residences due in June and pledging not to raise the sales tax while reducing some payroll taxes.

Letta, who won his first vote of confidence in parliament on Monday by 453 votes to 153, said that Italy could ill afford to focus simply on cutting its public debt, but rather needed a new emphasis on lifting the economy out of recession.

Backed by his own centre-left Democratic Party (PD), Silvio Berlusconi’s centre-right People of Freedom (PDL) party as well as centrists led by former prime minister Mario Monti, Letta also said that he would visit Berlin, Brussels and Paris this week to press his case against austerity, promising to achieve results within 18 months or “take the consequences.”

[quote]”Italy is dying from austerity alone. Growth policies cannot wait,” Letta said, as cited by AFP. [/quote]

“Europe can return to be the engine of sustainable growth, the engine of hope and future, only if it opens up . . . There cannot be winners and losers,” he added, calling for greater economic and political unity in a “United States of Europe”.

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The 46-year-old moderate on Monday hinted that some public funding of political parties would be eliminated, while government ministers’ pay would be cut, in order to make up for approximately 6 billion euros ($7.85 billion) in potential tax revenues. At the same time, he also made references to creating more jobs and broadening Italy’s welfare system, although he failed to give any specifics.

According to the Financial Times, political commentators immediately interpreted Mr Letta’s speech as a political balancing act aimed at preserving unity in a coalition forced upon his centre-left Democratic party following two months of political gridlock. Berlusconi’s PDL party for instance had party had set removing the residence tax as a precondition for its participation in the three-party coalition.

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[quote]Letta’s speech “squares the circle rhetorically and seems designed more to make sure he gets through the parliamentary vote than anything else,” while making scant reference to how programs might be paid for, noted Duncan McDonnell, a scholar at the European University Institute near Florence to the Wall Street Journal.[/quote]

Nevertheless, markets were cheered by Letta’s speech. Italy’s stock market trading up some 2.2 percent at the market’s close, while the country’s borrowing costs on its 10-year bonds dropped below 4 percent for the first time since 2010.