Italian Prime Minister Romano Prodi pledged to deliver a 2008 budget that will sustain growth, failing to blunt criticism from the leader of Italy's business lobby, who called for immediate corporate tax breaks.

Italy's finances no longer require urgent and hefty spending cuts, Prodi said Sunday, an indication his government has some leeway to cut taxes. That pledge was too little for Luca Cordero di Montezemolo, who went from supporting Prodi's election campaign last year to becoming one of his most ardent critics.
“Italy is too slow and more importantly its taxes are the highest in Europe,” Montezemolo said in Cernobbio, Italy during a two-day workshop with other political and business leaders. “The debate on whether to cut spending or taxes first is surreal. Both need to be done and right away.”
Excluding Portugal, Italy is the slowest-growing economy among the 13 nations sharing the euro and has lagged the region's growth rate for 11 years, according to the latest EU forecasts.
In addition it's saddled with the highest debt in Europe and had to push through drastic spending cuts to bring its deficit under a European Union limit.
“Sunday Prodi praised business leaders for their efforts in putting Italy back on track. Europe's fourth-biggest economy is on track to grow this year at around 2 percent, its biggest expansion since 2000. After years of losses Fiat SpA, led by Montezemolo and also the country's top manufacturer, is today Europe's fastest-growing carmaker.
“The economy has moved forward again thanks to businesses, but the credit for the improvement of the Italian economy should rightly also go to the government,” Prodi said at a conference in Bari, Italy, Sunday. The government's budget won't contain provisions for higher taxes similar to those included in the 2007 budget, he said. Montezemolo scoffed at the idea of the government sharing the credit and Prodi declaring Sunday that the “season of emergencies is over.”
“It's impossible to plan a country's economic policy without including courageous cuts in expenses, but I don't see the political conditions for these cuts at this time,” Montezemolo told reporters.
Italy's debt has contributed to making Italy the laggard among its neighbor. Italy had to pay out 69 billion euros ($95 billion) last year in interest payments, double the size of Slovenia's economy, and 55 percent of its debt is in the hands of foreign creditors, Prodi said Sunday.
Prodi's popularity has dipped since he took office in April last year, after reintroducing an inheritance tax and increasing income taxes for most Italians earning more than 40,000 euros ($55,000).
(Source: Bloomberg