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Protests greet Rome efforts to cut deficit

October 17, 2010

By Guy Dinmore in Rome, Published: October 17 2010

Skilful diplomatic manoeuvring in Brussels involving tactical alliances with France and Spain might get Italy out of a hole over proposed debt penalties but back home Giulio Tremonti, the finance minister, faces growing opposition to his deficit-reduction plans.

Warnings from economists and the Bank of Italy that his €25bn ($35bn) austerity package is stifling growth and costing jobs were reinforced on Saturday by upwards of 100,000 protesting workers clamouring in Rome for a general strike.

Mr Tremonti has also antagonised his own party by blocking progress in parliament last week of a bill to reform the university system, saying funds were not available.

His ratings in opinion polls sliding, Silvio Berlusconi, the centre-right prime minister, finds himself caught in the crossfire with only a precarious hold over a majority in parliament.

Italy’s €1,800bn public debt, approaching 120 per cent of gross domestic product, is fast becoming the single most important issue in domestic politics, with Mr Berlusconi forced by the crisis in Greece to tack away from his previously sanguine forecasts and recognise that Italy also needs a strong dose of austerity to keep the markets at bay.

Although Italy’s labour protests have not reached the scale of those in France, the weekend rally organised by the hardline FIOM metalworkers’ trade union underlined that the movement is still capable of mobilising its forces from across the country. Maurizio Landini, FIOM leader, made a blistering attack on the government’s economic policies, focusing on carmaker Fiat’s threats to make thousands of workers redundant.

The government will take heart, however, from the fact that two other trade union federations, which have struck deals with Fiat, stayed away from the rally. Even divisions within the CGIL federation, which includes FIOM, were laid bare when some workers left the rally early to show their unhappiness with Guglielmo Epifani, CGIL leader, whom they say has been too soft.

Nonetheless Mr Epifani, who is due to step down next month, backed Mr Landini’s call for a general strike.

Mr Tremonti – a potential successor to Mr Berlusconi should widely anticipated elections next spring go badly for the ruling coalition – was stung last week by a Bank of Italy report warning that the real unemployment rate was disguised by state-funded redundancies, and that incomes and private savings are falling.

More broadly, analysts are concerned that the austerity programme will put a brake on Italy’s already poor record of GDP growth – forecast at 1.0 per cent this year – while failing to meet the government target of reducing the budget deficit to 3.9 per cent in 2011 from 5.1 per cent this year.

“Tremonti is pretending that nothing will happen for Italy but the figures are telling a different story,” said Sandro Gozi, an economics spokesman for the opposition Democratic party. He also urged the European Commission to take a broader approach by stimulating the growth and investment needed by Italy to escape its debt trap.

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