ROME, July 24 Italian Prime Minister Mario Monti
imposed a compulsory plan to restore financial stability to the
cash-strapped Sicily region and overhaul its bloated public
administration, a government statement said on Tuesday.
The statement, issued after a meeting between Monti and
regional governor Raffaele Lombardo, said the leaders had agreed
"a plan for financial recovery and reorganisation of the
region's public administration, with a binding timeframe and
The statement stopped short of saying that Sicily would be
placed under special administration but made it clear that the
programme would be monitored from Rome and that it would insist
on cuts to the region's notoriously swollen payroll.
"The programme is to be finalised in the coming weeks and
will be formally signed by the regional and national
governments," the statement said.
Sicily, which accounts for about 5.5 percent of Italy's
gross domestic product, has been at the centre of growing
concerns over the financial stability of Italy's regional and
city governments after Monti said last week there were serious
concerns about the possibility that it could default.
The autonomous island region has some 5.3 billion euros in
debt, a long history of waste and mismanagement and an outsized
public sector payroll that critics say has been used by
successive governments to buy votes.
Officials have since played down fears of an immediate
crisis with Interior Minister Annamario Cancellieri saying on
Monday that there was no risk either of default or of a special
government administrator being appointed.
Worries about Sicily come as Italy itself moves to the
forefront of concerns in the euro zone crisis, with the cost of
servicing huge debts jumping on contagion fears for the bloc's
third biggest economy linked to the worsening plight of Spain.
Following the meeting, Lombardo repeated his own insistence
that Sicily had sound and sustainable finances and dismissed
talk of default as "rubbish" but confirmed he would resign by
the end of the month as previously agreed.
He also said the government had released 240 million euros
to help cover funding gaps in the health system, one of the
regional administration's key responsibilities.
While the plight of Italy's regional and municipal
authorities has not reached the levels seen in Spain, where
several regions have been reported to be close to asking for
state aid, there have been growing signs of strain from
successive cuts to government transfers.
On Tuesday, mayors from around Italy held a demonstration
outside the Senate to protest against the cuts which they say
will force them to curtail vital local services.
The Corte dei Conti, Italy's top public finance watchdog,
has made a damning series of criticisms of the regional
administration in Sicily, which has overseen a steady
deterioration in the island's finances over the past decade.
With an unemployment rate of 19.5 percent, almost twice the
national average, Sicily is among the regions hardest hit by the
recession but its public sector payroll has been constantly
increased, particularly in the health sector.