Confindustria clashes with the Government over budgetary exercise

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In April 1997, the Confindustria employers' confederation organised a "virtual demonstration "of around 14,000 employers against a government exercise to raise public revenue and reduce spending by a total of ITL 15,500 billion, deemed necessary to keep Italy's 1997 budget within the parameters set by the Maastricht Treaty on European Union.

On 27 March 1997, the Italian Government launched a further budgetary manoeuvre, involving ITL 15,500 billion, considered necessary to ensure that the 1997 budget respects the convergence criteria for Economic and Monetary Union agreed at Maastricht. The most significant revenue for the State will come from the early collection of some of the tax levied on the end-of-service allowance (Trattamento di Fine Rapporto, Tfr) funds. Employers contribute compulsorily to these funds to finance severance payments to employees on the termination of their employment contract, and a tax of 18% is levied on these payments. The Government will now collect a proportion of this tax early, requiring payment of 3.89% of the total amount in the Tfr funds in 1997 and 1998. Firms with fewer than 15 employees will be exempt from this early payment. It is calculated that the return will be in the region of ITL 8,600 billion. The other significant revenue comes from postponing for six months the payment of the end-of-service allowance to public employees who take voluntary early retirement. The overall figure of ITL 15,500 billion should be reached through some cuts in public expenditure, increases in postal tariffs and a six-month extension of the "closing agreement" on social security contributions (which gives extra time to companies which have failed to pay their contributions).

The adoption of the decree implementing this exercise has not been easy, due to conflict within the government majority and with the social partners. The Prime Minister, Romano Prodi, has officially announced that the Government will begin its reform of the welfare state (IT9703303F) within the next few weeks, with the objective of including it in the finance law of 1998.

Though meeting this announcement with a certain amount of caution, trade unions have expressed their support for the contents of the budgetary manoeuvre. They are satisfied with having avoided an intervention on early retirement through a form of a "solidarity contribution" of 1%-2% on pensions, which had previously been suggested. The Confindustria employers' organisation, by contrast, has severely criticised the Government's decisions: the early levying of the Tfr tax is considered harmful to firms as it takes away financial resources that are normally used for investment; while the manoeuvre as a whole does not provide for "structural" interventions to reduce expenditure, and is therefore considered inadequate in European terms.

Confindustria wanted to give a formal aspect to its protest, and it thus called a demonstration and general meeting of its affiliates and linked up with all their local branches through electronic means. Confcommercio, Confagricoltura and Confartigianato (the employers' confederations for the commerce, agriculture and craft sectors) backed Confindustria at the demonstration. Some 3, 500 employers took part in the gathering in Rome, and it is calculated that more than 11,000 were linked up by electronic means. The president of Confindustria, Giorgio Fossa, reaffirmed the employers' rejection of a line of economic policy which, in their view, systematically refuses to implement the reform of public expenditure and the welfare state. He claimed that the Tfr intervention is merely a new way of expressing a seriously mistaken approach which involves the cutting of investments. Mr Fossa also criticised the "sectoral" decisions adopted by the Government, and said that, while the employers do not intend siding with political parties, they will turn to political forces to ask Parliament to modify the budgetary manoeuvre.

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