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EDITIONS
Monday, 30 September, 2002, 16:36 GMT 17:36 UK
Italy offers tax and spending cuts
Silvio Berlusconi
Mr Berlusconi hopes to please everyone at once
The Italian government has passed a 2003 draft budget, which it claims both trims the state deficit and offers more than 7bn euros (4.4bn; $6.9bn) in tax cuts.

After an all-night meeting to hammer out the final details, Prime Minister Silvio Berlusconi told a press conference that the budget should be sufficient to placate the European Commission.

Brussels has expressed concern this year that the Italian budget deficit was reaching dangerous proportions, and complained that the government was using questionable accounting to massage the figures.

Full details of the Italian budget were to have been made public at 1500 GMT, but Mr Berlusconi said its overall effect would be to trim the deficit from the current 2% to 1.5% of gross domestic product.

The average government deficit in the eurozone is 1.4%, according to the Commission, and a number of countries - including France, Germany and Portugal - have been way above that level in recent months.

Cutting taxes...

The tax cuts will be most closely watched within Italy, since they go some way to meeting campaign promises issued by Mr Berlusconi when he was elected in May 2001.

Finance Minister Giulio Tremonti
Finance Minister Giulio Tremonti needs to placate Brussels' concerns
"There will be many Italians who will have more money to spend," Mr Berlusconi said

"This will encourage consumption and investments, and support the economy."

Italy's economy has slowed sharply in recent months: the Treasury has lowered its growth forecast for 2002 to just 0.6%, from the previous 1.3%.

... cutting spending

At the same time, the government plans to claw in some 20bn euros more in savings and extra revenue.

Mr Berlusconi stressed, however, that the public and state sector would see little difference.

"Spending levels are the same as last year," he said.

"That's to say that the state machine will continue to provide all the services that it ought to, increasing spending, but not as much as GDP."

The government is to introduce a number of temporary and specialised taxes - on property securitisation, for example - to top up revenues, which have steadily declined in over the past few years.

The budget now goes to parliament, and must be approved by the end of the year.

See also:

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