Italy to slash political jobs in new austerity

ROME – Italy's government vowed Saturday that its new austerity package will slash the country's huge bureaucratic costs, with thousands of jobs and local elected posts being gradually eliminated as small towns consolidate.

Premier Silvio Berlusconi has even called the cuts "excessive," but said they were approved because of widespread discontent among citizens over the perks enjoyed by Italy's political elite.

The government on Friday approved the euro45.5 billion ($64.8 billion) in emergency measures over two years to balance the budget by 2013 in response to demands by the European Central Bank. The package — a mix of spending cuts and tax increases, including a "solidarity tax" for high-earners — aims to calm market turmoil and make sure Italy is not the next victim of Europe's debt crisis.

Italy is expected to grow only by about 1 percent this year and has one of the highest debts in the 17-nation eurozone. The European Central Bank last week began buying Italian and Spanish bonds to try to stop those countries' borrowing costs from soaring.

Cabinet Minister Roberto Calderoli said Saturday the number of national lawmakers, currently almost 1,000, would be halved — though this requires a lengthy constitutional process.

He said provincial administrations for towns with less than 300,000 people or smaller than 3,000 sq. kilometers (1,160 sq. miles) will be abolished. Provincial administrations — in-between municipalities and regions — are seen by many as redundant and expensive.

While the exact number will be determined by a fall census, the measure is expected to affect between 29 and 35 provincial governments, Calderoli said. Newspaper La Repubblica said these include Siena, Trieste and Prato, an important business center outside Florence.

Towns with fewer than 1,000 residents will merge with larger communities, a change that affects about 1,970 out of Italy's 8,094 municipalities, according to the government.

These cuts mean about 5,000 elected jobs will be slashed, plus several thousand related jobs, Calderoli said. The measures take effect at the next local elections.

The issue of excessive administration has been a mainstay of the Italian political debate for years. But citizens have expressed new outrage recently that Italy's political class has spared itself from cuts it demanded of others.

Some critics said the measures didn't go far enough, others said they targeted mostly local administrations.

However, national lawmakers saw their "solidarity tax" double compared to other citizens, who face a 5 percent additional tax on income above euro90,000 ($128,250) and a 10 percent additional tax on income above euro150,000 ($213,750).

Lawmakers already passed a euro70 billion ($99 billion) austerity package last month, but the financial situation has deteriorated significantly since then. Under intense pressure from the European Central Bank and eurozone leaders, the government agreed to speed its goal of balancing the budget to 2013 instead of 2014, and to come up with structural reforms that stimulate investment and growth.

The news measures were passed in an emergency decree approved by the Cabinet. The decree is effective immediately but must be turned into law by parliament within 60 days.

It includes plans for the liberalization of local services, such as trash collection or transport. It also seeks to open up the country's rigid labor market by allowing more room for direct negotiations between companies and unions in areas now regulated by the national contract. It promises to crack down on businesses or professionals who do not issue a receipt — a practice so common that customers now are sometimes offered either a discount or the receipt.

But it's not clear whether the package does enough to stimulate Italy's stagnant economy. Italian Finance Minister Giulio Tremonti said the economic impact of these reforms might be significant but for now Italy is not revising its economic growth forecasts.