Italy’s parliament approves 2016 expansionary budget

Rome, Dec 23 (IANS) The Italian parliament gave final approval to the 2016 budget, after a confidence vote was called on the measure.

The package had to be approved by the end of the year, and was passed with 162 votes in favour and 125 votes against on Tuesday, Xinhua reported.

Opposition forces had presented over 800 amendments, but they were all dismissed before the confidence motion was submitted to senators.

Prime Minister Matteo Renzi’s centre-left cabinet has a slim majority in the Senate, which would partially explain why it called the confidence vote on the crucial provision.

Italian cabinets would have to be forced to step down in case a confidence vote receives a negative response.

The 2016 expansionary budget included measures worth some 30 billion euros overall, and a main provision in it was the abolition of a controversial tax on primary residencies also known as TASI.

This measure alone would cost the state around 3.5 billion euros, according to the finance ministry.

The budget also offered a cut in municipal levies on farm buildings, tax breaks to companies investing in new machinery and agricultural equipment, and benefits to those hiring new labour force.

The planned cut of a major corporate tax was postponed to 2017.

Other provisions included reducing the state TV licence fee, stopping a planned VAT hike, and increasing subsidies for poor, pensioners, and families with children.

Furthermore, the budget raised public spending on security and culture, which would help preventing the possible spread of extremism in the society, according to Renzi.

In fact, Italy’s cabinet decided to boost both security measures and investments on scholarships, developing projects in poor urban areas, and money for 18-year-olds to be spent on cultural activities, after the terror attacks that killed at least 130 people in Paris in November.

These specific measures would be worth some 2 billion euros overall.

The budget was passed despite the European Union (EU) had expressed doubts about it, since it would see the country respecting the EU deficit rules but slowing down its fiscal consolidation path.

Italy submitted the blueprint to the EU Commission in November, as requested to all EU member states, and asked for additional fiscal flexibility due to on-going structural reforms and a plan for investments.

The EU said it might allow more flexibility, depending on the country’s progress on reforms and considering the extra costs caused by the migration crisis, but also warned the budget was at risk of breaking EU spending rules.

The abolition of the housing tax was especially at odds with the EU recommendations, since the EU would rather have Italy increase taxes on property and reduce those on labour to boost growth and employment.

After this first review in November, Renzi’s cabinet further increased the 2016 budget deficit to 2.4 percent of gross domestic product (GDP) from the 2.2 percent upon which it had agreed with the EU Commission.

Such raise was mainly due to latest measures on security and culture, the cabinet said.

The budget will now face a final assessment by the EU Commission in spring 2016.

Italy’s Lower House had already passed it with 297 votes in favour and 93 votes against last week.