MNI: Draghi Holds Out Spending As Bait To Speed Reforms

Italian Prime Minister Mario Draghi will redouble efforts in the coming weeks to drive through key reforms including overhauls of the tax and court systems, dangling the prospect of extra spending to tempt legislators distracted by October local elections and talks on appointing the next national president, government sources told MNI.

A law allowing ministers to fill in the details of the fiscal reform via secondary legislation, which Draghi had hoped would be passed before July 31, is now set to be approved in two or three weeks, sources at the parliamentary finance committee told MNI.

This will allow the cabinet to take first measures to simplify aspects of Italy's labyrinthine tax system, including income tax cuts and moves to target evasion, by mid-September. By that time, ministers should also be able to approve a new competition law, which must be passed by the end of the year in order for Italy to continue to receive billions of euros in NextGeneration EU funds. Another requirement for the EU money is progress on a reform of the country's sluggish and inefficient courts, but this has so far been stuck in parliament amid squabbles between the parties of the governing coalition.

MORE GROWTH, MORE SPENDING

While the government sees no risk of failing to meet its deadlines with the European Union, this is thanks to progress made before summer, after which momentum flagged and attention was diverted to the upcoming regional elections as well as to the six-month-long process for deciding a replacement for President Sergio Mattarella, a source in the premiership said. The government will increase its presence in legislative committees and send out "sherpas" to pressure parliamentarians to agree on the reforms more quickly, a Finance Ministry source told MNI.

As an incentive, Draghi could agree to additional spending measures, the premiership source said, noting that updated growth and fiscal forecasts due to be sent to parliament this month will show a marked improvement in the economic outlook. Work on the 2022 budget law will start in October, and more room for spending could be provided by growth which the Finance Ministry now thinks could come in at close to 6% this year, much better than the 4.8% projected in April. Spending amendments could also be made to the 2021 budget, sources said.

A possible flashpoint is the future of the guaranteed minimum income implemented in 2019 under a government led by the populist Five-Star Movement. Draghi and Finance Minister Daniele Franco want a significant reform of the minimum income, which costs EUR8 billion a year, to be included in the 2022 budget law, the Finance Ministry source said. But Five Star, now part of the coalition, could go into opposition if the minimum income is threatened, a party official told MNI. The centre-left Democrats want the benefit overhauled, while other coalition parties want it ditched altogether.

The government is also confident of making changes to unemployment benefits, pensions and laws governing dismissals by the end of the year, sources said.