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Union anger at Italy’s austerity plan

May 27, 2010

by Guy Dinmore in Rome

Italy’s main left-wing trade union federation yesterday threatened to call a one-day general strike next month in response to the government’s austerity package which Silvio Berlusoni, centre-right prime minister, declared was necessary to defend the euro.

Guglielmo Epifani, leader of the CGIL federation, also called for protests in Rome on June 12 by public sector workers who face a three-year freeze on wages as part of the 24.9bn euro deficit-cutting measures. The union’s leadership will meet in the second week of June to reach a decision on the strike proposal.

“The cuts are all concentrated on workers, the same old recipe that leaves out high earners, while there seems to be little on the stimulus front,” Mr Epifani said.

A strike by CGIL members could cause considerable disruption across Italy but the issue appears likely to divide the labour movement with two other major federations stopping short of calling for workers to down tools.

Mr Berlusconi broke his silence on the austerity package, which the cabinet approved late on Tuesday, at a joint press conference with Giulio Tremonti, finance minister, denying press reports of serious divisions between them.

The billionaire prime minister said no taxes would be increased and cast the deficit cuts in the context of a joint European effort to slash government spending. But he also said the welfare system in Italy had become “irresponsible”.

“The sacrifices are absolutely necessary to defend our currency. It is necessary to defend the euro in order to save the future of Italy, its wealth, our wages, and family saving,” Mr Berlusconi said, looking tense and reading from a prepared text. “We are all in the same boat that is moving forward and we will overcome this difficult situation.”

The government decree includes wage cuts for ministers and parliamentarians, reductions in subsidies for political parties and spending by ministries, and 9bn euros in cuts for regional governments. It will be joined by a crackdown on tax evasion, which the prime minister said cost the state 120bn euros a year. On public sector workers looking forward to retirement, Mr Berlusconi said: “We are only asking them to stay at work for a couple of months more.”

Regional governments running high deficits in the health care sector said they would be forced to raise local income and business taxes.

Mr Tremonti aims to bring the budget deficit under 3 per cent of GDP by 2012 from 5.3 per cent in 2009. The total two-year adjustment over 2011 and 2012 amounts to 1.6 percentage points of GDP. Italy’s deficit levels are relatively modest compared with its peers, but public sector debt – projected to exceed 118 per cent of GDP this year – is the highest in Europe.

Olli Rehn, EU economic and monetary affairs commissioner, called the planned cuts “very significant” and said they would help restore confidence in the euro-zone. Mr Tremonti noted that ratings agencies had also signalled their approval of the package, as well as the OECD and the IMF.

Nonetheless economists expressed concern that the cuts would damage Italy’s slow recovery from two years of recession and noted that most of the measures were ad hoc and had little structural impact. Mr Berlusconi acknowledged that recovery would be slow.

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