Italy's Renzi tries new reform plan as economy sinks

ROME Fri Aug 29, 2014 5:51pm EDT

Italy's Prime Minister Matteo Renzi meets with Iraq's Prime Minister-designate Haider al-Abadi in Baghdad August 20, 2014. REUTERS/Mahmoud Raouf Mahmoud

Italy's Prime Minister Matteo Renzi meets with Iraq's Prime Minister-designate Haider al-Abadi in Baghdad August 20, 2014.

Credit: Reuters/Mahmoud Raouf Mahmoud

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ROME (Reuters) - Prime Minister Matteo Renzi on Friday presented a plan to quicken the pace of Italian justice and break down bureaucratic obstacles to investment as fresh data pointed to a further deterioration in Italy's recession bound economy.

The 39-year-old prime minister, due to attend a European Union summit in Brussels on Saturday, needs to restore international confidence in Italy and show he can make good on repeated pledges to revive growth and turn ambitious reform promises into concrete results.

Italy posted its first annual fall in consumer prices in 55 years in August and statistics bureau ISTAT said on Friday deflation would deepen in coming months. That followed a string of grim data this week showing falls in retail sales and consumer and business confidence and rising joblessness.

Speaking after a three-hour cabinet meeting, Renzi called the measures approved a "revolution" and said they would bring Italy's notoriously slow civil justice system more into line with those of its European peers and halve the backlog of cases.

They include halving courts' summer holidays, facilitating out of court settlements and reinforcing fast-track procedures for company and family disputes.

Italy's cumbersome, expensive and unpredictable justice system has long been singled out as one of the biggest hurdles to attracting international investment, despite repeated attempts at reform by previous governments.

The World Bank's 2014 Doing Business survey ranked Italy 103rd out of 189 on the ease of enforcing contracts, with a company requiring an average of 1,185 days and 37 separate procedures that eat up 23 percent of the value of a claim.

Among criminal justice proposals were tougher sanctions for tax fraud and toughening the rules on the statute of limitations with the aim of reducing the number of trials that are annulled before reaching a verdict.

The cabinet also approved a so-called "Unblock Italy" decree intended to accelerate infrastructure projects such as motorways between the southern cities of Naples and Bari and the Sicilian cities of Palermo and Catania.

Renzi's room for maneuver is limited by budget constraints and Economy Minister Pier Carlo Padoan told reporters none of the cabinet proposals, which now require the approval of parliament, involved a cost to state coffers.

With his customary verve Renzi had played up Friday's package during the summer political lull, saying it would be a "big bang" and tweeting "I will amaze you."

DELAYS

However at the last minute he took ambitious plans for education reform off the cabinet agenda and, with Italians returning only slowly from summer holidays, there was an air of anti-climax about his news conference.

Renzi said the education reform would be presented next week and complained that reporters' questions showed little interest in the measures that had just been approved, focusing instead on European budget rules and the woes of the economy.

The cabinet also delayed plans to privatize or merge hundreds of public utilities controlled by local authorities, with Padoan saying this would be tackled in October when the government presents its 2015 budget.

Renzi enjoys high poll ratings, but is facing growing criticism in the media and among business and trade unions.

"The people who govern us need to make decisions, even painful ones, that bring us to growth," Giorgio Squinzi, the head of employers' confederation Confindustria, said at a conference in the seaside town of Rimini.

Before the meeting Renzi posed in the courtyard of the prime minister's palace with an ice-cream to indicate his displeasure at a photo-montage on the cover of The Economist weekly, which showed him holding a cone and resembling a schoolboy.

Renzi, who holds the six-month rotating presidency of the EU, said the economic situation in Europe was "really worrying" and that he would propose Oct. 6 as the date for a special meeting of EU leaders to discuss the weakening growth outlook.

Italy has grown more slowly than any other country in the euro zone over the past decade and most economists expect it to again post little or no growth this year.

ISTAT confirmed on Friday the economy shrank 0.2 percent in the second quarter, dragged down by a slump in investments. The data showed that export growth, formerly the one sector to show some resilience, had almost totally petered out this year.

It also showed that joblessness jumped to 12.6 percent, close to record highs, and stands at 43 percent for those under the age of 24.

"We're still losing 1,000 jobs a day," Luigi Angeletti, head of the UIL union, said after data showed 69,000 people were added to the jobless rolls in July from the previous month.

"The economy needs a government which does something, instead of just pretending to do something," he said.

(Additional reporting by James Mackenzie and Paolo Biondi, editing by Ralph Boulton and Howard Goller)

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