Italy to get economic action plan

Italian Prime Minister Silvio Berlusconi will unveil plans aimed at kickstarting the country's sputtering economy on Thursday night in Rome.

He will present an "Action Plan for the Development of Italy" in a meeting with industrialists and trade union leaders. Mr Berlusconi is expected to table reforms aimed at boosting research and development (R&D) spending, and the competitiveness of small firms. Also in focus will be bankruptcy laws and the slow pace of the legal system. The prime minister is scheduled to start the meeting at 1830 GMT.

The government has been accused of underfunding R&D, making it harder for Italy to compete with other European nations and leading to a "brain-drain" of the country's brightest talents. Analysts say that hiring and firing staff is still too difficult and expensive, hampering the development of small- and medium-sized businesses. As a result, they say, Italy's corporate landscape is filled with numerous smaller companies that are often reluctant to become bigger because of all the extra hassle that would accompany the running of a larger firm. At the same time, bankruptcy laws make it difficult for failed company directors to set up new businesses and emerge from their debts, a situation that is hampering Italy's entrepreneurial spirit.

The government says that it has set about tackling the problems, adding that getting growth going was the responsibility of all of Italy's 60 million population. According to Il Sole 24 Ore, Italy's business newspaper, the government will focus on "opening up markets, infrastructure, research, making more incentives available, bankruptcy law, the slow pace of the justice system".

Mr Berlusconi has previously promised to cut taxes by 6.5bn euros ($8.6bn; £4.5bn) this year in an effort to get people and companies to spend. He has also promised to cap spending on transport, education and health so as to trim the ballooning budget deficit. Italy plans to raise as much as 25bn euros from privatisations in 2005, including a partial flotation of the post office and utility Enel. Critics argue that these moves do not go far enough and could make Italy's problems worse. Limiting government spending will lead to job losses, they counter, while the income tax cuts will have a negligible effect on sentiment and ultimately favour the wealthy.

The country has been one of the eurozone's worst economic performers in recent years. Growth was 1.1% in 2004, up from just 0.3% in 2003 and 0.4% in 2002 - an improvement but still a long way from ideal. At the same time, business and consumer confidence has dipped and analysts have raised concerns that what little spending there is stems from Italians dipping into their savings accounts or using credit cards. Without a pick up in national growth, they say, the money could eventually run out, bringing Italy's economy to a juddering halt. Consumer spending accounts for about two-thirds of Italy's economy.