“This budget shows budgetary discipline - vigorously pursued by this government since its first day in office - does pay off, allowing for a better and more equitable tax structure and enabling the government not to have to run after deteriorating cyclical conditions with further containment efforts”, said Prime Minister Mario Monti. Finance Minister Vittorio Grilli also said: “Thanks to the savings achieved through the spending review and other expenditure cuts, the increase in VAT will be limited to one-percentage point starting from July 1st 2013”.

The cabinet meeting also proposed a change to Article V of the Constitutional Law to better guarantee the principle of legal and economic unity of the Republic and supremacy of the State by bringing within the exclusive control of the State big transport networks, energy transmission and distribution, external trade and a number of other areas that were previously either the prerogative of both State and regions or of disputed jurisdiction. Tourism, one of the country’s most important resources, becomes a shared competence (currently it is the exclusive competence of regions). The Constitutional reform also brings local finances firmly and structurally under central government control and reinforces the powers of Italy’s Court of Auditors to inspect the regions’ finances and ensure they respect national and EU budgetary stability rules.

Earlier on Tuesday night, the weekly cabinet meeting also dismissed, under the anti-Mafia law, the local government of the southern city of Reggio Calabria. The city will be run by three government-appointed commissioners for 18 months until new elections are held. It is the first time that the government of a provincial capital is dismissed en masse because of suspected links to organised crime.

Separately, having noted the opinion of the Council of State, of 4 October, on the draft ministerial decree introducing the payment of the IMU property tax on the commercial activities of nonprofit organisations, the government also clarified in primary law when an activity is considered commercial in the different areas concerned, including welfare, health, education, cultural and sports. The implementing rules will be in place as planned by of January.