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15 October 2013

Reuters: Italy presents 2014 budget with tax, spending cuts


The Italian cabinet has approved a 2014 budget containing tax and spending cuts aimed at stimulating the recession-bound economy while keeping the budget deficit inside the EU's 3 per cent of output ceiling.

"I don't want to make dramatic claims but this is a significant step in the right direction, with lower taxes for companies and workers", Prime Minister Enrico Letta told reporters during a break in the cabinet meeting.

The budget, which aims to reduce Italy's fiscal gap in 2014 to 2.5 per cent of output from a targeted 3.0 per cent this year, must now begin its passage through parliament. The budget contains a cut in the so-called tax wedge - the difference between labour costs and take-home pay - worth €10.6 billion in 2014-2016, Letta said in a broad presentation of the main numbers in the three-year financial plan.

The tax reduction, aimed at boosting stagnant business investments and consumption, will be split between €5 billion for workers and €5.6 billion for companies. For 2014, the cut amounts to a total of €2.5 billion, much less than was called for by both employers and trade unions, highlighting the difficulties for the government in identifying offsetting spending cuts.

"There is reason to look at the future with greater optimism", Economy Minister Fabrizio Saccomanni said, adding that markets would reward Italy's determination to meet its fiscal commitments and tackle structural reforms. The budget deficit is targeted to fall further to 1.6 per cent of output in 2015, 0.8 per cent in 2016 and 0.1 per cent in 2017.

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© Reuters


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