Prime Minister Silvio Berlusconi said Italy’s planned 24.9 billion euros ($30.4 billion) of budget cuts over the next two years are “absolutely necessary” to defend the euro.
The measures are part of a European effort to convince investors the region can tame budget deficits and shore up the euro, which has fallen 15 percent this year. The package aims to reduce Italy’s budget gap an additional 1.6 percent of gross domestic product to bring the shortfall within the EU limit of 3 percent of GDP in 2012 from 5.3 percent last year.
Italy’s cuts include a three-year wage freeze for civil servants, a 10 percent budget cut for ministries, 4.5 billion euros in reduced transfers to regional governments, a partial amnesty on illegal construction and a crackdown on tax evasion.
Berlusconi said that while public spending that accounts for about half of GDP needed to be scaled back, the measures also aim to combat tax evasion and rein in the underground economy. Those steps include requiring the use of credit cards, checks or other traceable means for any transactions of more than 5,000 euros. Italy misses out on about 100 billion euros a year in unpaid taxes and that helps create Europe’s second-biggest underground economy after Greece, worth about 270 billion euros, or 22 percent of GDP, Berlusconi said. The plan also calls for a crackdown on false disability claims. Italy pays 16 billion euros a year in benefits to 2.7 million people claiming disabilities, Finance Minister Giulio Tremonti said.
http://www.businessweek.com/news/2010-05-26/berlusconi-says-30-billion-of-budget-cuts-needed-to-save-euro.html
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