May 21 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi is moving his government to Naples from Rome today to prove he's determined to resolve the increasingly unhealthy garbage crisis in the country's third-biggest city.

While cleaning up Naples isn't officially on the agenda of the 11:30 a.m. Cabinet meeting, tons of garbage were removed from the city's streets before the government's arrival. The first acts of the new administration will be the approval of an anti- crime bill and tax cuts. Berlusconi, 71, took office for the third time on May 8 after winning the April national vote.

``The crime bill and the tax cuts are ways of taking the heat off the real and immediate problems'' of the Naples trash crisis and the nearly bankrupt state of national airline Alitalia SpA, said James Walston, professor of politics at Rome's American University. ``It will take much more than Berlusconi's resolve and certainly more than a showy Cabinet meeting to remove thousands of tons of rubbish from the streets of Naples.''

To lift consumer spending and augment growth, Berlusconi plans to eliminate the country's main residential property tax and reduce levies on overtime pay and corporate bonuses. The tax cuts will be worth about 4 billion euros ($6.3 billion), Finance Minister Giulio Tremonti said yesterday. The government's temporary move to Naples is proof it will tackle the region's 15- year-old garbage disposal problem, the premier says.

Health Risk

Corrupt and inept local governments, the criminal interests of the Camorra mafia and residents' resistance to new incinerators and dumps have stymied all attempts to resolve the problem, investigators say. Numerous fires were set this weekend to the piles of waste around the city in protest, further increasing the health risk already rising with the summer heat.

Berlusconi's symbolic shift to Naples has had some effect. The center of the city has been cleaned up and trains hauling waste to Germany have started rolling again. About 2,900 tons of garbage remained on the streets yesterday, down from 4,200 on May 18, Ansa news agency reported, citing Asia, the company in charge of waste disposal for Naples.

While promising a solution to the garbage crisis, Berlusconi said during his first speech as premier last week that reviving Italian economic growth would be the top priority of his five- year term. The premier promised both the property and overtime tax cuts during his election campaign.

Funding Cuts

Tremonti said the cuts will be fully financed and won't increase Europe's largest debt. The government will cut public spending to pay for the tax cuts, Tremonti said.

Italy's economy, Europe's fourth biggest, is forecast to expand less this year than its euro-sharing partners, and is growing increasingly less competitive. Tremonti said yesterday that growth would be ``around zero'' this year. Italy is ranked last in terms of labor productivity among the 30-member Organization for Economic Cooperation and Development.

``The economic situation is not good and there are no quick fixes,'' said Marco Valli, an economist at UniCredit Group in Milan. ``The promised tax cuts will lift confidence and offset the increase in energy costs, which are weighing down consumers.''

Italy's inflation rate rose to its highest in 11 years in March, and dropped only slightly in April to 3.5 percent, driven by energy and food costs. Consumer spending fell the most in three years in March as inflation gained and people boosted their savings, the country's biggest retailers' lobby, Confcommercio, said on May 5.

Firebombs

While Berlusconi's tax cuts are aimed at the economy, the crime bill addresses Italians' growing unease with illegal immigrants, especially Roma, or Gypsies.

Naples became the symbol of Italians' increasing intolerance this weekend. After a 16-year-old Roma girl allegedly tried to kidnap a Neapolitan baby, local residents firebombed a nearby Roma camp, forcing its residents to flee.

Berlusconi promised ``zero tolerance'' of crime in his campaign. Italy has discussed inserting a law in the crime package that makes illegal immigration a crime punishable with up to four years in prison, a measure that may clash with European Union regulations.

The security package aims to make it easier to expel illegal immigrants -- another possible flashpoint with EU commissioners - - and will include proposed laws for fighting organized crime, Interior Minister Roberto Maroni said last week.

The Berlusconi security package, his handling of the garbage crisis, and his efforts to save Alitalia may strain relations with the EU. The European Commission is probing the legality of a 300 million-euro loan given by the government to Alitalia last month, and it sued Italy on May 6 to try to force the government to come up with a plan to fix the Naples garbage crisis.

``There's a good chance that there will be a showdown with the EU over the Roma, the trash issue, and even Alitalia,'' Walston said. ``This will provide Berlusconi cover by distracting attention away from what is actually being done.''

To contact the reporters on this story: Steve Scherer in Rome at scherer@bloomberg.netFlavia Krause-Jackson in Rome at fjackson@bloomberg.net

Last Updated: May 21, 2008 02:54 EDT