Rome

Letta says government in race against time

Italy to set up EU jobs task force with OECD

Letta says government in race against time

(By Denis Greenan). Rome, May 2 - Premier Enrico Letta said Thursday his unprecedented right-left government was racing against time to cut Italy's "unbearable" tax burden and stoke growth while maintaining fiscal discipline. In talks with Organisation for Economic Cooperation and Development chief Angel Gurria in Rome, Letta also said Italy would help the EU fight "nightmarish" youth unemployment. "The government is in a race against time," he said in Rome ahead of his meeting with Gurria, after returning from a tour of European leaders. "We've already wasted too much and the others aren't waiting for us. "There are complex decisions ahead of us and we have to take them with determination because there are international targets we have to measure up to in an major way". He said Italy would abide by its deficit and debt-reduction commitments to the European Union after meeting European Commission President Jose' Manuel Barroso earlier on Thursday. Letta saw Barroso at the end of a European tour in which he called for the bloc to put as much emphasis on promoting growth as it has on fiscal consolidation so far during the eurozone crisis. "I confirmed to Barroso that the intention is to maintain the commitments taken with the Commission by the previous government," said Letta, who met French President Francois Hollande on Wednesday and German Chancellor Angela Merkel on Tuesday. After his meeting with Gurria, Letta said Italy and the OECD would set up a task force to hatch ideas for the European Union to fight youth unemployment. The Italian premier said it would be a "joint working group between the OECD, the premier's office and the economy ministry to come up with ideas" on youth unemployment for the EU summit on June 27-28. Fighting youth unemployment in recession-hit Italy and the rest of the EU is a "categorical imperative", he said. "It is literally the nightmare that is gripping our society, our families," said the premier. New data this week showing unemployment at a record high of 12.1% or 19 million people out of work in the 17-nation eurozone offered frightening new figures on youth unemployment. One out of four under-25s was on the dole in the EU in March but almost two in three in Greece and Spain and nearly four out of 10 in Italy. Letta added that growth is not an alternative to fiscal discipline. "I think there is a need, together with maintaining our commitments, for a strong policy promoting jobs and growth", Letta said. "I think this part needs to be implemented now: it is not an alternative to rigour". The Italian premier also said "it would be an important signal to set aside the ideological debate at the European level concerning austerity and rigour and take concrete action", starting with youth unemployment. Letta said Italy's taxes are "unbearably" high and need to be cut without loosening EU-mandated targets. "Italy has a tax burden which is absolutely unsustainable," Letta said. "The burden needs to be lightened without loosening tax regulations". In the joint press conference with Gurria, Letta again stressed the need "to make up for the time lost" between elections at the end of February and the formation of the government which was sworn in on Sunday. "The moment has come to make up for lost time," he said. "I tried to meet in just a few hours as many people as possible to try and understand what margins we have for action". Asked about about the "corrective measures" to cover tax cuts, he said: "We will decide together as a majority". "For example," - he continued - "I agreed with President Hollande yesterday that the problem of the tax wedge (the gap between employers' labour costs and workers' take-home pay) exists in both Italy and France". Gurria said Italy is already seeing "the light at the end of the tunnel" of the economic crisis. He said that "an enormous effort" was being made to restore health to Italy's public finances which "must be consolidated". Cutting taxes "is a concern for all", Gurria also said, and in particular the cost of labour needs to be addressed ahead of tax cuts for companies. The OECD secretary-general said that in order to do this, action needed to focus on VAT, real estate and the development of the green economy. On the thorny issue of property-tax IMU, the OECD risked irking ex-premier Silvio Berlusconi's People of Freedom (PdL) party by saying Thursday that scrapping it should not be a priority for the new government. The PdL is threatening to pull its support from Letta's executive and sink it unless the widely despised tax is abolished. Berlusconi also wants the 2012 revenues collected from IMU returned to taxpayers to respect the key pledge he made in the run-up to February's general election. Letta, a member of the centre-left Democratic Party (PD) that had been in bitter combat with the PdL for two decades before the inconclusive election result forced them to form an unnatural alliance, has said that June's IMU payments would be suspended as part of a review of the tax. But he has not promised to abolish it completely.

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