(Adds more quotes)
By Giulio Piovaccari
MILAN, Feb 13 (Reuters) - The economic promises from all
Italy's main parties rely on overly optimistic assumptions about
inflation and interest rates, a former government spending
adviser who is being courted by various parties said on Tuesday.
Carlo Cottarelli, a former IMF executive director who helped
former prime ministers Enrico Letta and Matteo Renzi identify
potential public spending cuts in 2013 and 2014, welcomed the
fact that all parties acknowledged that public debt must be cut.
"Unfortunately all their programmes are based on very
optimistic assumptions and some of their proposals lack
funding," he told Reuters in an interview.
The scenario of rising inflation and low interest rates,
which all main parties are betting on, could not last long as
the European Central Bank will eventually raise rates,
All the main parties, especially the centre-right coalition
leading the polls, are promising tax cuts and higher spending
But Italy's public debt pile of more than 1.3 times output
limits policy options and spending laxity could scare investors.
Cottarelli, who works for Milan's Cattolica university, said
centre-right leader Silvio Berlusconi and other parties had
offered him a job in government after the March 4 vote.
The economist said he has not committed to any party so far
but will wait until a clear policy will be outlined by the new
government after the election.
His presence in government could help reassure markets and
EU authorities about the budget plans of any new government.
Cottarelli said he would make a decision after the vote.
The centre-right wants to introduce a single income tax rate
of 23 percent financed through 50 billion euros in cuts to tax
Cottarelli calculated a flat-tax regime with a "no tax area"
for yearly income below 12,000 euros would cost 64 billion euros
a year. He said it would be politically difficult to massively
reduce tax breaks that amounted to 101 billion euros a year in
"It would make the tax system simpler and more efficient,
but it would not lower the overall tax burden," he said of the
The centre-right also aims to reduce the debt-to-GDP ratio
by 25 percentage points by 2022 by doubling Italy's primary
surplus to 4 percent.
"A 4 percent surplus is consistent with EU requirements, but
... it does not take into account other spending commitments
included in their programme," Cottarelli said.
Italy's ruling PD party proposes to keep the primary budget
surplus - which excludes interest payments - unchanged at 2
percent for 10 years.
"I've hardly ever seen a country that has substantially
reduced its debt with just a 2 percent primary surplus"
Cottarelli said he was still calculating how strong Italy's
growth would have to be for the anti-establishment 5-Star
Movement to achieve its twin goals of cutting the debt-to-GDP
ratio by 40 percentage points in 10 years while also running a
(Editing by Robin Pomeroy)
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