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News Analysis: Italian PM's package to revive economy triggers mixed reactions

English.news.cn   2014-03-14 06:26:15

by Marzia De Giuli

ROME, March 13 (Xinhua) -- Italian Prime Minister Matteo Renzi's disclosure of planned reforms has triggered mixed reactions among observers who hailed his serious attempt to push the economy but also wondered about how feasible the ambitious agenda will be.

Renzi on Wednesday unveiled tax reductions worth 10 billion euros (13.8 billion U.S. dollars) on low earners and 2.4 billion euros on businesses, as well as simplified labor market rules and investments in public schools. On Thursday, he said his government will repay all debts to private companies within Sept. 21, and also will cut 500 million euros from the salaries of public managers.

The 39-year-old leader of the center-left Democratic Party (PD) has especially pledged to do in a few months what his predecessors have failed to do in years: simplify the Italian political system starting from abolition of the Senate's lawmaking power and considerable cuts of public expenditure.

Many in Italy praised Renzi's commitment to citizens and described his energy-beaming press conference at Palazzo Chigi, the seat of the Italian government, as the product of political regeneration. Labor unions leaders said they were satisfied with the tax cuts.

Economists, however, underlined the lack of incisive moves to foster growth of the recession-plagued economy. Furthermore, most of the presented measures still have to be developed, while fiscal cuts on businesses will be funded by higher taxes on financial yield-generated revenues in a country whose fundamentals are largely based on wealth of families.

Renzi's challenge to invert the trend of low growth was going in the right direction, Francesco Daveri, a professor of economics at the University of Parma, told Xinhua. What remained to be clarified, however, was the foremost part, namely the covering to fund the measures, which can only be precisely calculated at the end of the year, he said.

"As far as we know, the spending review will not produce this year the estimated savings of 7 billion euros," Daveri said. Commissioner for public spending reform in Italy Carlo Cottarelli has estimated savings at 3 billion euros for the current year, a forecast that Renzi saw as prudent.

According to Daveri, Italy would pay lower passive interests on public debt in 2014. The professor estimated potential 4 billion euros of lower interests. On Thursday, the interest rate on three-year Italian bonds dropped to an all-time low at auction.

"Three important elements emerged from Renzi's first press conference: revolutionary communication, clear political choices and uncertainty on the resources," Daniele Bellasio, a social media editor at financial newspaper Il Sole 24 Ore, pointed out.

"For the first time, an Italian prime minister was showing slides with titles, using slogans and rapid manners, standing alone in front of journalists. His press conference in fact was a direct dialogue with Italians," Bellasio told Xinhua.

Though in the background relative to what Bellasio defined the "political strength" of Renzi's agenda, the uncertainty on multiple resources posed some concerns about real feasibility of the much-needed reforms, he said.

The possible use of the margin that separates the deficit of 2.6 percent of gross domestic product (GDP) forecast by the European Commission (EC) for the present year from the 3 percent limit, for example, was a "very risky" solution proposed by Renzi, Bellasio said. "The frame was sustainable, but the painting was still missing," he highlighted.

Renzi on Thursday assured the European Union (EU) that his government will respect budget commitments after, earlier in the day, the EC welcomed his agenda but the European Central Bank (ECB) remarked that Italy had not made "tangible progress" on hitting the budget-deficit target.

Renzi also added that the EU should not only be an inspector of fiscal discipline. "We have to make it possible for Europe to be a Europe of peoples and citizens, and of hopes, not just of limitations," he stressed while speaking in the lower house. (1 euro = 1.38 U.S. dollars)

Editor: Mu Xuequan
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