MILAN, March 6 Italy's new government will fund
a key reduction in labour taxes through ambitious spending cuts
and a better use of European structural funds, new economy
minister Pier Carlo Padoan said in a newspaper interview on
The centre-left government of Matteo Renzi has pledged to
accelerate the sluggish pace of reforms in the euro zone's
third-biggest economy, which is one of the worst-performing in
the currency bloc.
It has said one of its first priorities will be to cut the
so-called tax wedge - the difference between what an employer
pays and a worker takes home.
Padoan told Il Sole 24 Ore newspaper he believed it would be
possible to raise more than the 3 billion euros in spending cuts
envisaged by the previous government for the first year.
"I would say 5 billion euros annually is not an unreasonable
figure," Padoan said in an interview with Il Sole 24 Ore.
He said European funds and one-off measures such as the
repatriation of capital could be used to cover the rest.
Italy has so far been unable to significantly rein in its
public spending and has improved its public finances in recent
years mainly through higher taxes.
Padoan said Italy was committed to keeping its budget
deficit below the EU ceiling of 3 percent of output.
On Wednesday, the European Commission put Italy on its watch
list because of the country's very high public debt and weak
competitiveness and said decisive action was needed to correct
imbalances in the economy. It will now monitor Italy's reforms
and could impose fines if they are not implemented.
The economy minister said measures to pay state arrears to
companies were ready and would be discussed at the next cabinet
"Thanks to the involvement of (state lender) CDP we think we
can structurally resolve the problem," he said.
Padoan said concerns raised by rating agency Fitch, which on
Wednesday warned that CDP's involvement could pressure its
credit rating if it eventually raised its debt level, were
"completely out of place."
"CDP and banks will be involved in a three-party scheme that
will benefit everyone," he said.
Italian companies were owed between 75 billion and 80
billion euros in payment arrears by the country's public
administration at the end of 2012, the European Union Industry
Commissioner Antonio Tajani said on Tuesday.
Asked about the idea of creating one or more "bad banks" to
hold non-performing loans that plague the balance sheets of
Italy's lenders Padoan said "it could be a useful tool" without
any further detail.
Bank of Italy Governor Ignazio Visco has said the regulator
is examining solutions to help domestic banks get rid of bad
loans, including possibly through a public guarantee to banks
that get together to offload problematic debts.
Under the previous government of Prime Minister Enrico
Letta, the Economy Ministry had said it saw no need to set up a
bad bank using either public or European Union funds.
Italian banks held nearly 156 billion euros in bad loans at
the end of last year, central bank data show. ($1 = 0.7278
(Reporting by Isla Binnie and Stephen Jewkes Editing by