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Factbox: Economic proposals in Italy's 5-Star, League government pact

ROME (Reuters) - Italy’s anti-establishment 5-Star Movement published on Friday a program it agreed with the far-right League, proposing a review of the European Union’s fiscal rules and “limited” deficit spending to fund tax cuts and increased welfare spending.[L5N1SP0LT]

Some of the more radical proposals -- including seeking to exclude state securities held by the European Central Bank from countries’ debt calculations -- were dropped or watered down compared with previous drafts.

There are no measures calling into question Italy’s membership of the euro zone, and the measures have no time-frame given for their adoption.

Following are highlights of the key economic segments.


- The accord says the government will cut debt, not by raising taxes or imposing austerity but by fuelling growth

- Will seek a change in EU rules so that expenditure on public investments does not count in budget deficit calculations

- Europe’s economic governance, including the Stability and Growth Pact and the fiscal compact, needs to be revised in cooperation with EU partners

- The government’s policies will be funded, after the intended revisions of EU treaties, by a multi-year plan “to cut wasteful spending, manage debt and an appropriate and limited recourse to deficit spending”

- Proposes to issue short-term Treasury bills as payment to individuals and companies who are owed money by the state, and, in this context, calls for official statistics agencies to “consider the definition of public debt”

- Makes no reference to revisions to Italy’s current deficit and debt targets


- Next year’s scheduled sales and excise tax increases, worth 12.5 bln euros, will be canceled. “Anachronistic” gasoline excise tax components also to be eliminated

- There will be just two tax rates, set at 15 pct and 20 pct, for individuals and companies, instead of the current rates ranging from 23 pct to 43 pct. Families to receive 3,000-euro annual tax deduction based on household income. No timing for this given

- Increase in sanctions, including prison, for tax evasion

- Amnesty for people struggling to pay tax arrears


- Abolish the ‘Fornero’ pension reform which raised the retirement ages and required future hikes. The pact says 5 billion euros will be needed to cover the cost

- Introduce a new points system allowing people to combine their age with the number of years they have paid social security contributions. This must equal 100, with the idea that those who have paid into the system for 41 years can retire once they are at least 59 years old. No timing given

- Cut in so-called “golden pensions” of more than 5,000 euros per month which have not been fully funded by contributions into the system


- Ensure income of 780 euros a month for the poor by providing universal income support. Recipients are obliged to look for work and accept one of the first three job offers received

- Calls for a 2 billion euro investment in employment agencies to better help job seekers

- Open dialogue with European Union to guarantee the use of 20 pct of the European Social Fund allocation to help Italy establish the universal income support. No timing given


- Creation of a public investment bank to help the economy, using existing resources

- Calls on the EU to “radically reform” its bail-in regime, to ensure greater protection for savers

- Tougher penalties for both bosses and regulators in cases of bank failures and possibility of compensation for retail shareholders of resolved banks

- Calls for a review of the Basel accords, saying parameters are seriously damaging small businesses in Italy

- Calls for state to remain a shareholder in bank Monte dei Paschi, recently bailed out by the government

- Calls for a move towards separating investment banking from retail banking

- Plans to make it obligatory for banks to obtain court authorization before trying to recover money from debtors


- Introduce a minimum wage

- Reduce labor taxes

- Re-introduce voucher payment scheme intended to simplify paperwork and reduce taxes for workers without regular contracts

- A ban on unpaid internships


- Alitalia must not simply be saved, but also relaunched because the country needs a competitive national airline. League economic chief Claudio Borghi told Reuters that the program includes stopping the sale of Alitalia

- A high-speed rail line under construction between Turin and Lyon should be re-considered with France


- The pact says the health of citizens and the environment around the ILVA steel factory in Taranto needs protecting, calls for an economic “re-conversion” to promote industry in the south based on closing “sources of pollution”. The pact does not say if the whole ILVA site should be shuttered


- Phase out slot machines and video lotteries, adopt greater restrictions on gambling industry

Reporting by Crispian Balmer, Steve Scherer, Giuseppe Fonte and Gavin Jones; Editing by Hugh Lawsonk, Jon Boyle and Peter Graff