Italian Prime Minister Matteo Renzi’s cabinet is poised to pass tax cuts worth as much as 10 billion euros ($14 billion) and approve plans to overhaul the labor market, as he sets out to jump-start the euro area’s third-biggest economy.
Today’s measures, which will probably include investments in schools and a plan to guarantee affordable housing, come after the approval of an election law bill by the lower house of parliament earlier today, the first step in Renzi’s uphill battle to make the country more governable.
Most of the 10 billion euros will be used to reduce Italy’s personal income tax, and will be covered by savings from spending cuts, lower debt-service expenses and a plan to cut the number of Lockheed Martin Corp.’s F-35 jets and other military outlays, news agency Ansa reported yesterday. Renzi said on Twitter that he will give details of the plan at a press conference scheduled for 5:00 p.m. local time.
“For the first time a significant amount of money will be put in Italians’ pockets,” Renzi, 39, who took office Feb. 22, said at a meeting of his Democratic Party yesterday.
To help businesses, today’s cabinet also may pass a plan to solve the issue of arrears owed by the public administration to companies, Deputy Economic Minister Enrico Morando was quoted by Radiocor as saying yesterday.
Renzi has said his proposal to overhaul the labor market, which will be discussed by parliament, may include an extension of unemployment benefits and progressive protection for newly hired workers.
The new premier, who has repeatedly spoken out in favor of the Danish’ “flexicurity” model, faces the challenge of reducing the gap between highly-protected workers with lifetime jobs and young people with precarious short-term contracts. “Flexicurity” combines greater flexibility in the labor market with security for workers at risk of unemployment.
Italy’s unemployment rate rose to a record 12.9 percent in January, while joblessness among those between the ages of 15 and 24 climbed to 42.4 percent, national statistics agency Istat said Feb. 28.
While Renzi’s plans are ambitious, many proposed measures such as the labor overhaul ’’are likely to proceed slowly,’’ Wolfango Piccoli, an analyst with Teneo Intelligence in London, said in a research report today. “Renzi and Economy Minister Pier Carlo Padoan may also have to perform financial acrobatics to find sufficient space in the budget for their agenda.”
Renzi’s labor market plan follows a first attempt by ex-Premier Mario Monti in 2012 to pass the most ambitious changes in decades by making it easier to terminate contracts, hire workers and extend unemployment benefits to temporary workers. The measures, which got final approval by parliament in June that year, were diluted by opposition from trade unions and the old guard in Renzi’s Democratic Party.