The comments indicate Mr. Letta’s intention to cooperate with E.U. officials in adhering to strict spending policies, even though the measures are opposed by large segments of the political class in Rome. In return, Mr. Letta, who was sworn in last weekend, might hope to obtain flexibility from the authorities in Brussels, who want to keep a moderate pro-European in charge in Rome.
The Italian government will “maintain the engagements taken by the previous government” and will present its plans within “the next few days, the next few weeks,” Mr. Letta said at a joint news conference with José Manuel Barroso, the president of the European Commission.
Mr. Letta faces the delicate task of governing in a coalition with former Prime Minister Silvio Berlusconi’s People of Liberty Party. It is the first experiment in power-sharing between the right and left in Italy in decades, and one that his own Democratic Party members had fiercely opposed.
Mr. Berlusconi came back from the political dead when his coalition placed second in national elections in February, largely by promising to abolish an unpopular property tax imposed by the government of Prime Minister Mario Monti, whose newly founded political party won less than 10 percent of the February vote. Italy is still struggling to rein in public spending, even as the government is under pressure to eliminate that tax for 2013 and return the 2012 payment, as Mr. Berlusconi wants. But that would leave a hole of €8 billion, or $10.4 billion, in the national budget.
Mr. Letta has promised the Italian Parliament that he will suspend property tax contributions due in June and start a review of the tax, which is worth an estimated €4 billion a year. One of the main questions hanging over the new Italian government is how Mr. Letta would keep the country’s deficit aligned with the E.U. target of 3 percent of gross domestic product if the tax were scrapped.
Despite those uncertainties, Mr. Barroso showered Mr. Letta with praise, saying the commission wanted to remove Italy from its watch list of countries facing an “excessive deficit procedure.” Being left on the list would be a signal to investors that a member state is struggling to abide by budgetary rigor.
“Political stability is back in Italy,” Mr. Barroso said. “I am very confident that it will be possible, provided that now Italy details the measures that it intends to take, that Italy will be able to go out of the excessive deficit procedure,” he said. “But that of course now depends on the presentation in concrete terms of the plans of the new Italian government.”
The strength of Mr. Letta’s government will depend on his ability to help improve the flagging Italian economy. Unemployment is above 11 percent, with the rate rising to 38 percent for young people, and the small and midsize businesses that are the country’s economic backbone are facing a credit crunch and prohibitively high labor costs.
On Thursday, Mr. Letta demanded that a meeting of E.U. leaders in June focus on youth unemployment, which he described as the “the real nightmare of my country and the E.U.” It was “important for us to have in June some important signals for European citizens in terms of recovering hope and confidence,” he said.
Mr. Letta also lent his support to plans drawn up by the commission for a European banking union, which would aim to reduce, or even eliminate, the need for taxpayers to foot the bill for failing banks. A banking union could also help Italian businesses gain access to financing at lower interest rates and would be a sign that Europe can keep to its promises to overhaul important aspects of its economic governance.
Article source: http://www.nytimes.com/2013/05/03/business/global/03iht-euitaly03.html?partner=rss&emc=rss