Italy's economy is on the up and the time is right for tax cuts sought by Prime Minister Silvio Berlusconi, his industry minister said on Saturday. Berlusconi set an ultimatum for his coalition partners on Friday, saying that if they did not agree to his plan to cut income tax next year he would seek new elections. Italy now faces tough choices on where to find the cash.
But Industry Minister Antonio Marzano, a member of Berlusconi's Forza Italia party, said the Italian economy, which is forecast to grow just 1.2 percent this year, is showing signs of an upturn, giving the government more room to manoeuvre.
Marzano told Il Giornale newspaper that Italy's growth, unemployment and inflation figures were better than in the other two big euro zone countries, France and Germany. "It makes us think the economy is on the up," he said in an interview.
"We absolutely must seize this moment and intervene to support our productive apparatus," he said. This would include legislation aimed at reducing bureaucracy for new companies as well as tax cuts for families and businesses, he said.
Berlusconi wants tax cuts of 0.5 percent of gross domestic product, or 6 billion euros ($7.82 billion), next year.
But many in his government will resist any attempt to squeeze cash from state sector pay packets and European Union rules ban Italy from increasing its budget deficit to help fund the cuts. Marzano said that rule had to change.
Italy wants the EU's budget rulebook, the Stability and Growth Pact, to exclude certain items, such as infrastructure spending, from deficit calculations. It also wants the pact's deficit cap of 3 percent of GDP to be more flexible.
"If we really want to keep the numerical reference, it might be opportune to make the 3 percent an average over several years so some years you could go above it and other years below it," Marzano was quoted as saying.
"In short the 3 percent should be kept as a reference point, not as a limit."
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