The Italian government has approved a growth-orientated budget for 2016 which includes a range of tax cuts. But as Tim Graham reports, it's likely to be more popular with voters than with the European Commission.
For a country where national debt is above 130 percent of GDP, tax cuts might not seem a logical move. But that's exactly what Italy's Prime Minister Matteo Renzi has delivered in his 2016 budget, and in a variety of ways. A tax on primary residences is being scrapped, as are levies on agricultural and industrial equipment. Perhaps the headline cut is to the main corporate tax, at a cost of at least 5 billion euros to the state. Matteo Renzi is touting his budget as one to create a simpler and fairer country. SOUNDBITE (English) MATTEO RENZI, ITALIAN PRIME MINISTER, SAYING: "Italy has returned to growth. The slogan of this budget is 'Italy with a plus sign'. Italy has returned to growth, certainly taking advantage of the external situation but most importantly thanks to the reforms it has carried out." But is the blueprint enough to keep driving forward Italy's financial recovery? Citi's Christian Schulz. SOUNDBITE (English) CHRISTIAN SCHULZ, ECONOMIST, CITI, SAYING: "It's never enough. Italy clearly needs more structural reforms. But compared to what we've seen over the past decades in Italy, this is one of the most exciting periods in terms of structural economic reform." The budget now goes before the Italian parliament, where it must be approved by year's end. But tricky negotiations lie ahead with the European Commission, which is likely to prefer Italy steps up fiscal tightening rather than relaxes it.