The federation of Italian industrialists, Confindustria, praised the government on Tuesday for cutting business taxes in the 2008 budget but called for firmer pruning of state spending.
The package approved by the cabinet late on Friday night goes "in the right direction" and means Italy should not lose any more ground on Germany and other big European economies, Confindustria Chairman Luca Cordero di Montezemolo said.
The 10.7-billion-euro budget must still be approved by parliament and changes are likely before this happens.
For the moment it includes a cut in the main corporation tax (IRES), which falls from 33% to 28%, and also another a cut in the regional business tax (IRAP), which drops to 3.9% from 4.25%.
"This is significant. It encourages an entrepreneurial approach and investments," Montezemolo said, noting that the IRAP cut came on top of last year's cut in social security contributions payable by employers.
But the Confindustria chairman said the budget was "still too timid" where cuts in state spending were concerned, noting that spending continued to grow at the same rate as GDP.
"This is not good. To free up resources useful for growth the public administration must spend less," he said.
The budget, as it stands at present, earmarks over a billion euros to help revamp the national railways system and about half a billion for public housing. It also sets aside 1.3 billion for the welfare system and 2.3 billion for pay rises for public sector employees.
But the measures that have grabbed most attention are other ones. According to a survey carried out for the La Repubblica newspaper, Italians think the best thing for the man or woman in the street is a cut in housing taxes for low income brackets.
The most useful thing in the budget for the country as a whole was deemed to be a 5% cut in government ministry staff.
Winning cabinet approval for the budget was an important achievement for Premier Romano Prodi, whose nine-party coalition has seemed particularly fractious in recent weeks.
Prodi achieved this success in part by putting off a decision on the details of a contentious pension reform, which will become part the budget. Those issues are to be faced at a cabinet meeting on October 12.
