Italy's lower house passes 2017 draft budget

The Italian Chamber of Deputies on Monday approved the 2017 draft budget with 290 votes in favor and 118 votes against.

The draft's approval was widely expected, since Prime Minister Matteo Renzi's cabinet won a confidence vote on the budget in the same chamber on Friday. In case of a negative result in the confidence vote, the cabinet would have been forced to resign.

The bill now needs to pass in the senate, which is expected to hold its voting session in December.

The draft budget is overall worth 26.5 billion euros (28 billion U.S. dollars). Among key measures, it expands public spending in pension and health system, and avoids a planned value-added tax increase that would be worth of 15 billion euros.

It allocates 7 billion euros over three years to let some categories of workers retire earlier than a 2012 pension reform would have allowed. It also contains measures to sustain low-income pensioners.

The National Health System will be funded with 113 billion euros in 2017, two billions more compared to this year, and with 114 billions in 2018.

The budget draft also includes a reduction of corporate tax from 27.5 percent to 24 percent next year, and a 12-billion-euro increase in public investments from 2017 to 2019.

A personal income tax on agricultural firms would be scrapped, and social security contributions from self-employed workers reduced. One billion euros would be allocated in a guaranteed fund supporting small and medium-seize companies.

In the plan, Renzi's cabinet raised the country's budget deficit target to 2.4 percent of GDP this year, and to 2.3 percent in 2017 (from previous 2.3 percent and 1.8 targets, respectively).

The decision brought about new tensions with the European Commission, which is in charge of reviewing and approving the budgets of all of the EU member states.

The Commission expressed doubts on the expansionary plan, asking Italy to clarify the revision of its targets, and the gap between the latest figures and the commitments made last May.

However, the Italian prime minister is under pressure for the upcoming referendum on the constitutional reform scheduled for Dec. 4, on which he has put his own political carrier at stake.

Renzi has criticized the EU's austerity policies, and said the budget plan would not change because Italy needs to boost its weak recovery.

The Italian authorities also stressed the country is facing extraordinary spending because of the migration crisis, and the post-quake reconstruction in the central regions.

Latest opinion polls have showed the "no" to the constitutional referendum would be in the lead.

A rejection of the reform might bring the cabinet to resign, and such uncertainty has in latest weeks resulted in more volatility in the government bond markets for fear of possible political instability following the crucial electoral result.

"I hope everyone will appreciate the fact that the budget has been passed by the lower house before the referendum," Renzi told a press conference on Monday.

The bill needs to be passed in an identical text by both houses by the end of the year, in order to become law. Yet, according to Renzi, the senate would have "more than enough time to review it."

The prime minister stressed the referendum would have no impact on the budget, even in case of a rejection of the constitutional reform.

"This is a solid-constructed budget bill, and no one will be able to put its pillars into questions," he said. (1 euro = 1.06 U.S. dollars) Endit