Italian Prime Minister Enrico Letta said he would stick to his predecessor’s promise to balance the budget this year and will work with France to promote more pro- growth policies in the euro region.
Italy will “maintain” its commitment to eliminate its deficit in structural terms, Letta said at a press conference with French President Francois Hollande in Paris today. The structural deficit discounts the effects of the recession.
“We can’t have a Europe where everybody is going down and only a few countries are well,” Letta said. “I’m sure we will find an accord and that France and Italy together will make choices that will help Europe.”
In his first speech to Parliament on April 29, Letta called for the European Union to move away from the austerity policies that have contributed to Italy’s longest recession in more than two decades. He pledged a series of tax cuts to boost growth and create jobs that economists estimate will lead to more than 10 billion euros ($13 billion) in lost revenue this year.
The combination of higher taxes and lower spending implemented by outgoing former prime minister Mario Monti helped the country bring its overall budget shortfall within the EU’s limit of 3 percent of gross domestic product, while deepening the economic slump. Letta inherits an economy that’s probably in its eighth quarter of contraction, with a jobless rate nearing 12 percent, the highest in more than two decades.
Letta was designated prime minister two months after February’s inconclusive elections that left Italy with a hung Parliament. He managed to resurrect the alliance between his Democratic Party and former premier Silvio Berlusconi’s People of Liberty that sustained Monti in power for more than a year.
Tensions have already emerged, with Berlusconi threatening this week to withdraw his support if the government doesn’t abolish an unpopular tax on primary residences known as IMU and refund last year’s payment.
“On IMU the controversy doesn’t correspond to reality,” Letta said today. He reiterated his pledge to suspend the next payment of the levy due in June and work with Parliament to review the entire tax for possible changes.
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