Italy adopts 2020 budget, government gets confidence vote

[ROME] Italian deputies on Monday adopted the first budget presented by the country's new coalition government between the centre-left Democratic Party and the anti-establishment Five Star Movement.

Passage of the budget was a test for the government in power for just four months, where tensions have already surfaced between the two former rivals.

First presented in October, the budget passed with 334 votes versus 232 votes against with four abstentions.

Underscoring its importance, the law was tied to a vote of confidence in the government.

The Senate approved the text a week ago, sending it back to the MPs in the lower house for a final vote.

The budget will do little, however, to help the euro zone's third-largest economy to reduce its debt, as the country continues to struggle with a stagnant economy and high unemployment.

In 2019, the public debt is expected to reach 135.7 per cent of GDP, up from 134.8 in 2018. Italy's GDP rose just 0.1 percent in the third quarter.

Environment measures figured prominently in the budget, with a plan for public investment in a "Green New Deal," worth 4.24 billion euros (S$6.37 billion) over three years.

Not less than 150 million euros annually from 2020-2022 will go towards reducing greenhouse gas emissions, as part of the new plan.

The budget also calls for a freeze in VAT tax next year, representing about 23 billion in lost funds for the state.

But in 2021, standard VAT will increase to 25 per cent from 22 per cent, with its reduced rate moving from 10 per cent to 12 per cent.

A controversial plastic tax bill was watered down, with companies now obliged to pay a levy of 45 cents per kilo on disposable products versus 1 euro.

Sugary drinks will also be taxed 10 cents per litre starting October 1, part of a wave of recent taxes on soda to help fight obesity.

Higher petrol taxes in 2021 and 2022 will also help Italy's government recoup nearly 3 billion euros.

The budget has faced fierce opposition from Italy's far-right League, led by former deputy prime minister and now-senator Matteo Salvini, who on Monday denounced the new law.

Mr Salvini said on Monday the new budget would mean "7 billion in new taxes" for Italian voters, 30 per cent of whom support the League.

AFP