Tremonti Defends Deficit Reduction Package

by Ulrika Lomas, Tax-News.com, Brussels

11 June 2010

While he was in Luxembourg attending the meeting of European finance ministers, Giulio Tremonti, Italy’s Minister of the Economy, urged that the government’s recently-announced EUR24bn (USD29bn) two-year fiscal package should remain unchanged during debate in parliament.

The Italian government’s measures were introduced last month with the intention of maintaining Italy’s promise to the European Union (EU) to reduce its fiscal deficit to below 3% of gross domestic product by 2012. With the country’s recovery still fragile, the government’s actions were concentrated on reducing its expenditure and continuing measures against tax evasion, rather than increasing taxes.

In Luxembourg, Tremonti emphasized that, while discussion in parliament was a good thing, the Italian government had proposed “the right thing in the right way,” and the package’s effectiveness should not be compromised. He professed that, given the government’s willingness to act decisively on the deficit, Italy was in a position, with France and Germany, at the forefront of European policies against the debt crisis.

He also said that the measures being taken against tax evasion, both domestic and international, would probably produce results beyond expectations. While the results from those measures have only been estimated in the package, the government is convinced that a total of EUR6.6bn of additional funds will eventually be seen as an underestimate. He also stressed that, in contrast to previous utilization of such funds against spending commitments, they would now be used directly to reduce the fiscal deficit.

On the subject of pension reform, he expected little in the way of social security savings, at least in the first three years, from the EU’s instruction to Italy to equalize the pensionable age of men and women at 65 by 2012. He was not aware whether this reform would be added to the current fiscal package during its passage through parliament.

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