Economy looms large in Italy’s general election - analysis

The early election, called after the collapse of the central-left government led by outgoing Premier Romano Prodi in January, will result in a new national parliament and a new prime minister for the next five years. Voters were not electing each parliamentarian member, but selecting from lists headed by 32 candidates for prime minister. Both Berlusconi and Veltroni had devoted much of their campaigns to selling their plans to stimulate the sluggish economy.

The Italian economic growth has been under potential in recent years. In 2007, it was 1.5%, far below the eurozone average of 2.7%. The $2.4 trillion economy was projected to grow just0.3% this year, according to a forecast by the International Monetary Fund earlier this month, the slowest among the more than two dozen “advanced economies.” With a government debt of €1,400 billion ($2,200 billion), more than its annual GDP, Italy is Europe’s most-indebted country, incurring a per capita annual debt interest of some €1,200 ($1,900).

Among the 30 members of the Organization for Economic Cooperation and Development (OECD), Italy ranks last in terms of labor productivity. Analysts said low labor productivity and the public debt are probably the most crippling for the Italian economy. To save the stumbling economy, the two main contenders made similar pledges like lowering taxes and cutting public spending.

Berlusconi promised to cut payroll taxes, lower income taxes as well as abolish council taxes on first homes, aiming to bring the tax burden below 40% of the GDP, down from the record level of 43.3% in 2007. In a last-minute pledge just before a ban on campaigning began at midnight on Friday, Berlusconi offered another tax cuts worth €4 billion ($6.3 billion) by eliminating tax on car and motorcycle registration. “We will use that treasure to abolish this tax that has no reason to exist,” Berlusconi said on a TV program. His People of Freedom Party said it will reduce Italy’s public debt mountain and respect European Union deficit-elimination targets by cutting the high cost of Italian politics and eliminating wasteful spending.

Veltroni said his government will cut income tax by 1% a year starting in 2009, introduce tax credits for poor working mothers, simplify corporate tax procedures and increase family benefits including a €2,500 one-off payment for a couple’s first child. His Democratic Party pledged “complete rigor” in public-accounts management and to reduce spending without cutting social services.

Voters, however, would like to see actions rather than promises. “I hope the new ruling party can fulfill their commitments and take concrete actions to reduce tax, add jobs and promote economic growth,” a company manager, who declined to be named, said after he cast his ballot. He criticized Berlusconi for failing to realize what he had promised during his previous term as prime minister from 2001 to 2006. Latest opinion polls, however, gave Berlusconi five to nine percentage points ahead of Veltroni, but 15% of voters remain undecided. Exit poll results were expected shortly after all voting stations close on Monday afternoon. (people.com.cn)