* Critics say Renzi is vague on spending cuts
* Accused of using one-off measures to fund tax cuts
* PM defends budget plan as rigorous, prudent
* Plan hikes debt, structural deficit in 2014
By Gavin Jones
ROME, April 9 Italian Prime Minister Matteo
Renzi defended his fiscal reform plans on Wednesday against
critics inside and outside his Democratic Party as the European
Commission reminded Italy of its commitment to balance its
Renzi, who outlined his government's Economic and Financial
Document (DEF) late on Tuesday, was criticised for failing to
provide detail on promised spending cuts and for using one-off
revenues to help finance plans for permanent tax cuts.
The DEF, which must be presented to the European Commission,
updates the government's economic forecasts and provides the
framework for its fiscal plans over coming years
Stefano Fassina, a PD member and ex-junior economy minister
who has often clashed with Renzi, said the DEF marked no shift
in economic policy that had failed Italy in recent years and
would result in "less growth, fewer jobs and more public debt".
He forecast that before the end of the year the government
would be forced to take corrective action to meet its goal for
the budget deficit, targeted at 2.6 percent of national output.
Renzi, speaking at a conference in Verona, said he "totally
ruled out" the need for a fiscal correction this year and said
the government's forecast of 0.8 percent economic growth was
The European Commission and the International Monetary Fund
forecast Italian growth of 0.6 percent, but do not take account
of 6.7 billion euros of tax cuts for low earners which Renzi has
said will take effect in May.
These cuts will translate into an increase of around 80
euros per month in the pay packets of around 10 million Italians
and the government's hope is that citizens will spend the money
and thus reinvigorate chronically weak domestic demand.
"We have been very cautious and we expect positive surprises
in the course of the year, not negative ones," Renzi said.
The centre-right opposition said Renzi had given no details
on where he plans to cut 4.5 billion euros of spending and was
relying on unreliable, one-off revenues.
These revenues, amounting to 2.2 billion euros, are due to
come largely from an increase in sales tax stemming from a
promise by the government to pay back the debt arrears owed by
public sector bodies to private suppliers.
Renato Brunetta, lower house leader of Silvio Berlusconi's
opposition Forza Italia party, accused Renzi of making empty
promises aimed at garnering support ahead of elections for the
European parliament next month, rather than helping the economy.
Economist Tito Boeri, of Milan's Bocconi University, said
those benefiting from Renzi's promised tax cuts would only spend
the money if they were convinced the cuts were properly funded
and therefore permanent, and this was still not clear.
And while Renzi characterized his budget plans as rigorous
and prudent, a spokesman for the European Commission pointed out
that Italy "needs to achieve a balanced budget in structural
terms in order to put its public debt ratio on a downward path".
However the DEF raises the government's target for the
structural deficit, which strips out the effects of growth
fluctuations, to 0.6 percent of GDP from 0.3 percent this year,
moving further away from the Commission's recommendation last
year for a balanced structural budget in 2014.
The DEF forecasts that Italy's public debt, the second
highest in the euro zone after Greece's, will rise to a new
record of 134.9 percent of GDP this year, up from a previous
forecast of 132.8 percent.
Spokesman Simon O'Connor said the Commission could not
assess whether the DEF respected Italy's commitments until it
had received the full document. The Commission will issue its
country specific recommendations to member states next month,
when it also updates its economic forecasts.
(Additional reporting by Sara Rossi and Francesco Guarascio,
editing by Mark Heinrich)