Govt aims to start rolling back debt in 2014

(By Christopher Livesay) (ANSA) – Rome, November 18 – Premier Enrico Letta said Monday that his administration will present plans for a round of privatizations this week, while a special commissioner overseeing a review of public spending announced billions in additional savings over the next three years. The government is looking to reduce Italy’s massive public debt, which stands at over two trillion euros, around 130% of gross domestic product, via privatization of State assets, including real estate.

Last week the European Commission said that Rome risked breaking the EU’s growth and stability pact next year because of debt levels after it analysed the government’s budget package for 2014. “This week there will be an important event, we’ll present the privatization plan that is being discussed at the economy ministry today,” Letta said at a conference organised by the Financial Times. “I’m sure that the budget bill is right and that the privatization plan will enable us to reduce our debt next year for the first time in five years”. The Italian government is considering selling a 4% stake in the international oil and gas company ENI. At the current state of play, the sale of a 4% stake would generate around 2.6 billion euros.

Later in the day, special commissioner Carlo Cottarelli submitted a report announcing additional savings of over 11 billion euros were being sought as part of Italy’s review of public spending. Those savings would amount to 3.6 billion euros by 2015, 8.3 billion euros by 2016, and 11.3 billion euros by 2017, according to the report.

Speaking at a roundtable gathering of ministers at the premier’s office, Cottarelli, the former International Monetary Fund’s head of fiscal affairs, said the goal of the budget package was to save in three-year spending the equivalent of roughly 2% of Italy’s gross domestic product in 2013.

Letta said this year, which saw his fragile left-right government replace Mario Monti’s emergency technocrat administration in April, has been one of “political and economic transition” and that 2014 will be “decisive for Italy”. The premier hopes Italy will enjoy a full year of growth next year as he is banking on the country pulling out of its longest recession in over two decades by the end of 2013. “In this quarter we expect to resolve the problem of growth,” Letta said. He added that youth unemployment, which has risen to above 40% in the recession while the level for the overall population is over 12%, was Italy’s “nightmare”. Letta’s government has been criticised for not doing enough to combat the recession and its 2014 budget law has been lambasted for being too timid with tax cuts. But the premier stressed that his administration, which can rely on a more slender majority in parliament after a split within the centre right, has to take a pragmatic approach. “It is not possible to think about staging a revolution to get out of the crisis, in part because of the political problems, you have to take one step at a time,” he said. He added that 2014 would also be a crucial year for institutional reforms for Italy. When he was sworn in, Letta set himself an 18-month deadline to introduce a new election law and usher in changes to Italy’s Constitutional set-up to make the country easier to govern. Changes to the Constitution should include stripping the Senate of law-making powers and turning it into a regional assembly. At present the Senate has the same powers as the Lower House, and legislation has to be approved in the same form in both houses, making lawmaking a drawn-out affair. The current electoral law has been widely criticised because it does not let voters pick their MPs and tends to produce different majorities in the two houses, as happened in February’s general election which led to two months of deadlock.

“2014 will be the key year for the introduction of reforms and for change of the country’s political-institutional system,” he said. “The vote on the institutional reforms is expected by the summer”. He added that his government’s plans to phase out public funding of parties will boost public confidence in the political class, which has been hit by a long series of corruption scandals.