MNI: Italy Reform Progress Slows As Elections Near-Sources

The Italian government is facing tougher-than-expected parliamentary resistance to an overhaul of competition laws whose approval may now narrowly miss an informal deadline required for accessing EUR19 billion in European Union funds, while a tax reform and plans to reduce dependence on Russian energy may not be complete before next year’s elections, sources close to the matter told MNI.

The “Markets and Competition” bill, which would allow the liberalisation of sectors including public transport and subject local authorities to more control from Italy’s Competition Authority, may also be slightly watered down by the time it receives parliamentary approval, a government source and two members of parliament’s Industry Committee said.

Its approval is among 47 targets with which Italy must comply by June 30 in order to receive the second tranche of the EUR220 billion it is due from the European Union’s NextGenerationEUaid programme. But meeting this deadline is not guaranteed, as the government of Prime Minister Mario Draghi grapples with a parliament increasingly distracted by upcoming elections, leaving it little time for other tasks such as considering how to repurpose EU-funded projects in order to reduce energy dependence on Russia.

MORE THAN 1,000 AMENDMENTS

Parliamentarians are arguing that the proposed competition changes would permit foreign control of services now provided by the public sector like metro services, the government source told MNI, adding that local authorities, taxis and private beach operators are lobbying hard to dilute the reform, long requested by Brussels.

Politicians from the left-right coalition supporting Draghi’s technocratic government have presented more than a thousand amendments to the bill, sources from the Industry Committee told MNI.

Local elections to be held June 12 are also beginning to distract parliamentarians, who are anxious to stand out with less than a year to go before national elections due by March 2023.

“The closer we get to 2023, the more parties will be in electoral mode,” said the government source.

TAX REFORM

The government faces even more problems in its attempts to complete a major reform of the tax system. Draghi is starting to think that this project, which aims to simplify the tax code and reduce the burden on salaries and pensions but whose completion is not a precondition for receiving EU funds, will not be concluded by the next parliament, two sources in the government told MNI.

Under a delegation law passed in December setting out a broad framework for a new tax system, the government and parliament have 18 months to decide on details. While changes already agreed include reducing the number of income tax brackets and a temporary flat tax for self-employed workers making less than EUR65,000 a year, other changes have been bogged down in arguments between left-leaning parties, which want more taxes on assets and a greater emphasis on combating tax evasion, and the right, which has pushed for a flat tax on income.

The right-wing League, led by former deputy prime minister Matteo Salvini, has already forced Draghi to drop an attempt to update Italy’s housing registry, which is used as a basis for levying a property tax, the government source acknowledged.

“That would have opened the door to increasing taxes on Italian houses, something the Europeans have been dreaming of,” a League politician involved in the talks told MNI.

The increasingly complicated task of negotiating with its own coalition is leaving Draghi’s government little time for other tasks. Like other EU countries, Italy would like to reshape the national Recovery Plan which outlines its NextGenEU spending to facilitate its transition away from Russian energy sources, but there is not enough time.

“That will take months to rethink and maybe we won’t be able to do it,” said the government source.