New Italian PM begins reforms

Italian Prime Minister Matteo Renzi launched a series of economic reforms on Wednesday aimed at jump-starting the Italian economy, which is experiencing its longest post-war recession. It is Renzi's first major reform announcement since taking office less than a month ago.

"There has never been a reform course so meaty and significant," Renzi told reporters at a news conference in Rome. "This is one of the biggest fiscal reforms we can imagine."

The first major reform would include a reduction of income tax by a total of 10 billion euros. That would mean that Italians who earned under 25,000 euros ($34,760 ) a year would see a 1,000 euro boost to their annual income with the new tax cut beginning on May 1, the head of government said.

"For us, it is obvious that putting 1,000 extra euros (per year) in the pockets of Italians will help consumption," Renzi said.

Less spending, debt repayments

The premier said the tax cuts would be financed through cuts to government spending. A recent reduction in Rome's borrowing costs would also free up money and allow the government to borrow more, thus bolstering its means to support his plan.

Renzi also said that, by July, the government would repay roughly 90 billion euros of debt owed by the state to private sector businesses.

Additional reforms would include reducing payroll taxes paid by bigger companies by 10 percent and investing 3.5 billion euros into decaying school facilities.

Third-largest EU economy

Last year, Italy's economy shrank another 1.9 percent while the country's sovereign debt soared to 132.6 percent of the GDP. The country's economy is the third largest in the EU and has the highest proportion of public debt to GDP after Greece.

The new prime minister, who heads the center-left Democratic Party, rose to power in late February after a daring power grab. The 39-year-old politician, who was mayor of Florence at the time, accused then-prime minister Enrico Letta, of failing to live up to reform pledges during his 10 months at the helm of the Italian government.

Renzi became not only the third premier in a row to have been selected by the president rather than the voters, but also the youngest ever in Italian history.

Renzi has vowed to overhaul the country's tax system, constitution and allegedly excessive bureaucracy, with the aim of stimulating economic growth and consumer confidence.

kms/ipj (AP, AFP, Reuters)