| Berlusconi criticises EU fiscal rules { November 23 2004 } Original Source Link: (May no longer be active) http://news.ft.com/cms/s/1986ab9a-3d7f-11d9-abe0-00000e2511c8,dwp_uuid=d4f2ab60-c98e-11d7-81c6-0820abe49a01.htmlhttp://news.ft.com/cms/s/1986ab9a-3d7f-11d9-abe0-00000e2511c8,dwp_uuid=d4f2ab60-c98e-11d7-81c6-0820abe49a01.html
Berlusconi criticises EU fiscal rules By Tony Barber in Rome Published: November 23 2004 19:12 | Last updated: November 23 2004 19:12
Silvio Berlusconi, Italy's centre-right prime minister, on Tuesday intensified his personal crusade for income tax cuts by attacking the European Union's rules on fiscal discipline as bad for business and economic growth.
Describing tax cuts as fundamental to his political philosophy, the 68-year-old billionaire businessman warned that Italy and other EU countries risked falling into "strategic decline" unless they reduced state economic controls and boosted competitiveness.
His comments, in an article in Il Foglio, a rightwing newspaper in which his wife Veronica is the chief shareholder, were published four days after he threatened to call snap national elections unless Italy's 2005 budget included his proposals for income tax cuts.
Rarely short of critics in his 11-year political career, Mr Berlusconi is encountering resistance to his tax policies from Italian business, the central bank, government ministries, international financial institutions and the European Commission - not to mention some of his coalition allies.
All are emphasising that tax cuts must be accommodated in a framework that controls Italy's budget deficit and brings down its public debt, the world's third highest at 106 per cent of gross domestic product.
With an election at most 18 months away, Mr Berlusconi sees tax cuts as crucial to his prospects of victory and as the fulfilment of the vision with which he entered politics amid the collapse of Italy's old ruling parties in 1993-94.
In Tuesday's article, he repeated his threat to call an early election but broadened his campaign by denouncing the "rigid obsession with fiscal constraints" of the EU's Maastricht treaty - the rules under which EU governments are supposed to keep budget deficits under 3 per cent of GDP. "These perverse factors have increased the value of our currency [the euro] beyond what is necessary, and have artificially penalised the competitiveness of our industries and services," he said.
He complained that "the blessed introduction of the single European currency has, up to now, produced an outcome that is the exact opposite of the purpose for which the euro was born, and that is an asphyxiated economy and limping growth".
Although EU governments and the Commission are reviewing the EU's fiscal rules, Italy stands to benefit less than other countries because it is likely that those with high public debt will be allowed less budgetary freedom.
Some Italian ministers want the EU to soften the rules by excluding infrastructure and research spending from deficits, or by calculating deficits over the course of an economic cycle rather than each year. But these ideas have received a lukewarm response.
In the view of central bankers and economists in Rome and other EU capitals, Mr Berlusconi's frustration with the euro's "over-valuation" is explained partly by the fact that Italy has found it harder than other member states to retain international competitiveness since the euro's launch in 1999.
Opposition politicians in Italy said Mr Berlusconi should think twice before mocking the euro, because Italy's eurozone membership had insulated it from financial market shocks after last December's revelations of a multi-billion euro fraud at the Parmalat food group.
Mr Berlusconi wants to include €6bn ($7.85bn, £4.2bn) of tax cuts in the 2005 budget.
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