Aug. 30 - The Italian government has backtracked on parts of its widely criticized austerity package scrapping a tax on high earners and scaling back cuts to local authority funding. Sonia Legg reports.
Angry mayors took to the streets of Milan on Monday. More than 800 of them set aside political differences to protest against cuts. They were objecting to plans to merge councils with less than 1,000 residents and abolish provincial governments with less than 300,000 inhabitants. (SOUNDBITE) (Italian) MAYOR OF CARTOSIO, FRANCESCO MONGELLA SAYING: "They want to sell the idea that savings can be made by cutting mayors and small communities, this is completely false. They don't take away any money and work like real workers.' A day later and the government has begun the process of amending its 45 and half billion euro austerity package. The first one was approved earlier this month after weeks of market turbulence. It was introduced to prevent Italy being sucked into a Greek-style crisis and was widely criticised. The government now wants to scrap a tax on high earners and reduce cuts to local authority funding. Instead it will delay retirement for some workers by excluding years spent at university and military service. The President of the Senate Budget Commission Antonio Azzolini says the amendments will still help Italy balance its books. (SOUNDBITE) (Italian) PRESIDENT OF SENATE BUDGET COMMISSION ANTONIO AZZOLINI SAYING: "This is important because in the amendment communication the changes have been listed in a way that does not in any way change the final figure. Therefore the changes should achieve the same savings as before.' But Reuters Financial Correspondent Gavin Jones believes the amendments will cause more confusion. (SOUNDBITE) (English) GAVIN JONES, REUTERS SENIOR FINANCIAL CORRESPONDENT SAYING: "I don't think markets will be very pleased to see these constant changes, constant negotiations. What they (the government) produced last night was obviously the result of a political compromise and we have seen the solidarity tax removed and we have seen the cuts to local government authorities watered down quite a lot and replaced by fairly unspecified measures on combating tax evasion. Analysts are always a bit sceptical about that unless they are very specific." There was more bad news for Italy too on Tuesday. A senior Bank of Italy official said the economy will grow by less than 1 percent this year and be even weaker in 2012. He hopes the revised package - now going through parliament - will also include measures to boost growth. Sonia Legg, Reuters.