- POSTED: 21 Dec 2013 03:36
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Italy's parliament on Friday approved a 2014 budget intended to tackle a social crisis which is still deep even after the formal end of its longest post-war recession.
ROME: Italy's parliament on Friday approved a 2014 budget intended to tackle a social crisis which is still deep even after the formal end of its longest post-war recession.
The government has said the budget "reverses" the austerity of recent years but critics including the business lobby Confindustria warn that it is not enough to stimulate economic growth.
Finance Minister Fabrizio Saccomanni said the budget will keep Italy in line with EU norms on debt and deficit, as well as lowering taxes on labour.
"It marks a change of direction," he said.
It includes the creation of a fund with proceeds from bureaucratic cuts that will be used to lower income tax, as well as measures to encourage hiring of workers, higher taxes on large pensions and the introduction of a new benefits scheme for the unemployed.
One controversial measure is a provision that would oblige tech giants such as Google or Facebook to use Italian companies to sell their advertising and could therefore increase their tax bill in Italy.
Italy's economy, the third-biggest in the Eurozone, ended two years of contraction in the third quarter with zero-per cent growth but unemployment is still at record-high levels and thousands of businesses have been forced to shut down in the crisis.
"This budget does not take into account the emergency in our country. It does nothing to re-launch our economy," said Tito Boeri, an economics professor at Bocconi University in Milan.
"There is very little done to reduce taxes," he said.
Senator Giorgio Santini from the centre-left Democratic Party admitted the budget was only "small steps".
"We did not have much room for manoeuvre," he said.
Luca Paolazzi, director of Confindustria's research centre, said that provisions for abolishing property tax on primary residences - a major demand for the centre-right - were "useless and unfair".
"There should have been more done for growth," he said.
The head of Confindustria, Giorgio Squinzi, said there were "positive elements" in the budget but it was "insufficient to get the country going again".
The Italian Senate is due to give its definitive approval to the measures on Monday.
Prime Minister Enrico Letta's government is forecasting gross domestic product will grow by 1.1 per cent in 2014 but the official data agency Istat is being more cautious, predicting an expansion of only 0.7 per cent.
"I would like to do more. We will do it next year," Letta said, adding: "2014 will be the year of acceleration."
New Istat data on Friday painted a mixed picture, with retail sales seen falling 0.1 per cent in October over the month and down 1.6 per cent on a 12-month comparison.
Industrial orders were up 1.2 per cent in October from a year earlier but were down 2.5 per cent from September.
Industrial turnover fell by 0.7 per cent from September, with a drop of 1.2 per cent in the domestic market.
At the same time, Istat said that Italy's trade surplus to countries outside the European Union had risen to 2.4 billion euros (US$3.3 billion) in November compared to 1.7 billion euros in November 2012.
Pier Carlo Padoan, chief economist at the Organisation for Economic Co-operation and Development (OECD), said at a conference in Rome sounded a cautious note about the prospects for a recovery in Italy.
"The engines for growth are weaker," he said.
Padoan said any tax cuts should be "sustainable" and supported efforts to cut the cost of Italy's bloated bureaucracy - a major focus for public anger in recent years over politicians' salaries and perks.