ROME (AP) — Italy’s new premier on Monday made immediate concessions to his uneasy coalition allies, promising to ease part of a slate of austerity measures that have weighed on Italians impatient at the slow pace of economic recovery.
While pledging the country will do what the eurozone wants to improve its public finances and debt problem, the center-left leader had to placate his tense two-day-old coalition, including former premier Silvio Berlusconi’s conservatives, whose support he needs for confirmation votes in Parliament.
Bending in part to a key Berlusconi campaign promise, Letta said his government will immediately suspend an unpopular tax on primary residences due in June and make it fairer to less affluent taxpayers. He also pledged not to raise the sales tax and to reduce some payroll taxes.
“Reducing taxes is a priority,” Letta said, promising he would “pinpoint a strategy to revive growth without interfering with the process to heal finances.”
The European Union has insisted on rigorous austerity to heal Italy’s finances, but the public’s patience has been tried by spending cuts and higher taxes. Voters across the continent have been rebelling against governments that have imposed such measures.
While Letta stressed the urgency of reducing the tax burden on homeowners, consumers and businesses, he didn’t say how he planned to make up for the reduced revenues. He might have to resort to more spending cuts, which could ultimately sharpen an already harsh part of the austerity agendas.
Markets appeared pleased over Letta’s brand new government. Italy’s stock market was 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.
Letta’s government must be confirmed Tuesday in the Senate. The failure of Letta’s party to win both chambers in the February election left the nation in political paralysis until he agreed to a deal on Saturday with Berlusconi.
Berlusconi had demanded that the new government honor his No. 1 campaign promise to voters — abolishing the property tax on primary residences and refunding what Italians paid in the tax last year. Letta didn’t say if last year’s property tax payments would be refunded, but a top Berlusconi aide immediately shouted victory and insisted it would be.
“If Letta wants the PDL votes, this is the condition posed in a coalition government,” an exultant Brunetta told state TV, referring to the initials of Berlusconi’s party.
Standard & Poor’s rating services said that it wasn’t clear yet whether the government can put growth reforms in place, but said Letta’s initial comments “suggest an intention to slow, but not to reverse” the pace of austerity.
Intent on reassuring eurozone governments and European Union officials that despite his demanding coalition partners, Italy’s would stay the course of economic reform, Letta will soon visit major European capitals. He begins in Berlin on Tuesday, assuming his government wins the Senate confidence vote.
He’ll also visit Paris and Brussels to give, as he put it, a “sign that this is a European and a pro-Europe government.”
He vowed to keep the sales tax from rising to 22 percent from 21 percent in July, as predecessor Mario Monti’s government had planned. Italy’s business sector is worried the higher tax would discourage consumers from buying everything from washing machines to new clothing.
The new premier also pledged to reduce payroll taxes for businesses hiring the young or those currently on temporary work contracts.
Italy’s central bank said Monday that Italian companies were suffering ever more as loans dry up, with banks reluctant to make risky deals.
Italians are impatient after 18 months of austerity budget, pension reform and new taxes under Monti to see jobs return and the small and medium firms that power the economy bounce back. Letta denounced the “anger and conflict” that the five-year economic slump has triggered.
On Sunday, an unemployed man shot and wounded two police officers Sunday in a crowded square outside the prime minister’s office at the same time the government was being sworn in elsewhere in the capital.
The premier indicated his impatience with the political class’ failure to enact reforms. He indicated that he would give this legislature 18 months to make serious inroads or he might throw in the towel. However, virtually nobody expects the new government to last anywhere near Parliament’s five-year term.
Barry reported from Milan.
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