Monti Homestretch Starts With Push for Corporate Tax Breaks
Italian Prime Minister Mario Monti, who imposed austerity in the first half of his 18-month caretaker administration, is considering tax breaks for businesses in the homestretch.
His ministers will propose stimulus measures in a Cabinet meeting today in Rome in a bid to reverse an economic slump that has deepened since Monti came to power in November. Deputy Industry Minister Mario Ciaccia is pushing for infrastructure tax breaks of as much as 50 billion euros ($63 billion) through 2020, while Labor Minister Elsa Fornero has proposed fiscal benefits for companies that invest in training workers.
Monti is shifting focus as Italy’s fourth recession since 2001 worsens. Since taking over from Silvio Berlusconi in November, the premier has reined in Italy’s deficit and lowered borrowing costs through an austerity program that included tax increases on fuel, real estate and luxury goods. Now, with unemployment at a 13-year high, Monti and his ministers are pushing for relief.
“It is something we need to work on,” Fornero said of her plan in a speech broadcast yesterday from Rimini, Italy, by SkyTG24. “We may reduce their tax burden.”
Monti is restocking his agenda in Italy as he continues his diplomacy abroad to calm Europe’s sovereign debt crisis. He is traveling to Berlin for an Aug. 29 meeting with German Chancellor Angela Merkel, who has stressed the importance of budget discipline. Monti has been joined by French President Francois Hollande and Spanish Prime Minister Mariano Rajoy in calling for policies to stimulate economic growth and bring down high borrowing costs.
The infrastructure proposal that Ciaccia announced this week calls for the elimination of value-added tax on construction projects like highways and ports. According to Ciaccia, it could spur 300 billion euros of investment through 2020. The plan won the support of Italy’s biggest business lobby, Confindustria.
At today’s cabinet meeting all ministers will present individual proposals to spur growth, which include a plan by the Treasury to reduce the country’s debt by as much as 20 billion euros a year through the sale of state-owned assets. Other measures that will be discussed are speeding up the justice system, cutting red tape, introducing measures aimed to support start-up businesses and promoting Italy’s less-known tourist sites, daily newspaper La Stampa reported today without saying where it got the information.
Monti will be called on to weigh the economic benefits of tax breaks against potential costs in the bond market. The yield on Italian 10-year bonds has fallen more than 1 percentage points to 5.71 percent since Nov. 16 when Monti took over and began his campaign of budget rigor.
“I don’t think it makes sense,” said Alberto Mingardi, head of the pro-free market Bruno Leoni research center in Turin. “If the government really had the ability for fiscal easing of that scale, which I don’t think it does, it would make much more sense to do something across the board,” instead of focusing on infrastructure, he said.