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No tax cuts because coffers bare: Italy's Tremonti

ROME - A stagnant economy and rising budget deficit means Italy has no money to spend, and promised tax cuts will have to wait until most fiscal powers have been decentralised, Economy Minister Giulio Tremonti said.

In an interview published on Sunday in daily Corriere della Sera, Tremonti said with markets in crisis and weak economic conditions, his priority must be consolidating state finances.

‘With growth that has slowed to zero and the deficit on the rise there is no money for anyone, not even the government,’ he said. ‘We can't share out a cake that doesn't exist.’

After winning an April election with a tax-cutting agenda, Silvio Berlusconi's centre-right government has been criticised since it issued a budget plan last month that envisaged tax revenues would remain broadly stable for the next five years.

Tremonti said tax cuts could only come in the medium term, after a sweeping reform to devolve tax and spending powers to the regions.

‘Tax cuts will be a dividend of fiscal federalism, less spending and less taxes.’

Much of the interview was dedicated to the damage done by globalisation, about which Tremonti has written a book.

‘Globalisation was invented by the Western elite, those paying the bill are the poorest, not only in the West,’ he said.

‘What we are seeing now is a circus of horrors with four rings: the financial crisis, the energy crisis, the food crisis, the perfect storm that can arrive with a new Middle East war.’

Tremonti said globalisation, driven in the 1990s by the US democrats under Bill Clinton and backed by the Italian left, was at the root of today's surging oil prices and rising inflation.

He called it ‘grotesque’ that the leftwing opposition that supported globalisation should be planning street protests against rising prices, ‘convinced they can trick the people, convinced the truth won't come out.’

He also said Italy's presidency of the G8 in 2009 ‘could be the basis for the development of an international initiative aimed at recreating Bretton Woods,’ a reference to the 1944 accords on monetary policy and exchange rates and which created the International Monetary Fund and World Bank. Tremonti did not elaborate.