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Monti says Italy will cut $5.5 billion in state spending in bid to avoid sales tax hike
ROME (AP) ' Italian Premier Mario Monti pledged on Monday to make '4.2 billion ($5.5 billion) in cuts in state spending over the next six months in a bid to avoid raising sales taxes and tapped a leading private-sector turnaround expert for the job of determining just what gets slashed.
Monti told journalists after a five-hour-long Cabinet meeting on the nation's financial crisis that he hopes to avoid hiking the national sales tax from 21 to 23 percent in October by eliminating wasteful spending, implementing better purchasing policies, and possibly putting unused government properties up for sale.
Avoiding a hike in the VAT sales tax isn't completely guaranteed, Monti warned, saying "for now we can say that we hope to have, from the reduction of spending, sufficient benefits" to avoid the increase.
He gave the unenviable task of deciding what gets cut in which ministry to Enrico Bondi, the Italian turnaround expert with a reputation for hard-nosed spending cuts who helped restructure the Parmalat dairy empire after its collapse in fraudulent bankruptcy last decade.
"I am grateful to Bondi for his having accepted this heavy task," said Monti. "We have pinpointed in him the person most respected in Italy for his resolute work on restructuring and cost-cutting."
Bondi for his part promised to "get straight to work" in mapping out where cuts can be made.
Italian news reports have said Monti has already felt resistance from several ministries, including the foreign affairs and defense ministries.
Just what will be ripe for slashing is expected to be announced by May 31.
Monti, an economist, was appointed in November to lead a government of technocrats to help save Italy from financial disaster. He replaced Premier Silvio Berlusconi, who resigned amid market pressures as Italy looked increasingly likely to be the eurozone's next big debt crisis victim.
Berlusconi, in a bid to win back market confidence, had pledged in his final months to have Italy balance its budget by 2013. But with Italy mired in recession, and widespread tax evasion taking a continued toll on state coffers, the target date was recently rolled back from 2013 to 2015.
At the news conference, the current premier took a swipe at Berlusconi for having abolished property taxes on primary residences in keeping with a 2008 campaign promise. With local governments starved for property tax money, Monti has revived the property tax, reinstating it at even higher rates.
The property tax "shouldn't have been abolished," Monti said, adding that Italy now "needs to make up for lost time, not in years, but in months."
Monti brushed off political criticism that his government was relying too much on new or higher taxes to reduce Italy's debt. He blamed stubbornly chronic tax evasion for being one big reason new taxes were needed. He also fingered as a culprit what he called the "hidden tax of corruption in pulbic contracts and hiring."
Prosecutors in several cities are leading corruption probes of how taxpayer-funded political party funding as well as of public contracts.
Monti has promised to get Italy's economy growing again, but so far his government has been widely criticized by industrialists and union leaders for failing to revive growth.