Truce is reached on Italian budget

ROME (Reuter) - Italian trade unions met the Prime Minister, Silvio Berlusconi, yesterday to discuss pensions reforms and said the government had shown flexibility on how to slash state spending next year.

Sergio Cofferati, the leader of the CGIL, Italy's largest union confederation, said that 'the meeting was positive. The government said it was ready to modify the make-up of the 1995 budget plan'. A government statement on the talks, which followed union threats of a 'hot autumn' of strikes unless budget plans were rewritten, confirmed that the cabinet still intended to cut the 1995 deficit by at least 45 trillion lire ( pounds 19bn).

The statement confirmed Mr Berlusconi's commitment to no new taxes and said the government hoped to claw back money by tackling tax evasion, a union demand, and reducing public sector waste to keep the deficit to a targeted 138.6 trillion lire ( pounds 58.2bn).

The government plan called for 15 trillion lire ( pounds 6.3bn) of higher revenue and spending cuts of 30 trillion lire ( pounds 12.6bn). The government has previously said it hopes to save at least 8 trillion lire ( pounds 3.3bn) through structural reform of Italy's generous state pension system.

Despite the positive mood after the Berlusconi meeting and an agreement to reconvene next Monday, union leaders said they had not dropped their strike threat. Sergio D'Antoni, of the CISL union, said: 'If expressions of flexibility regarding our demands are followed by facts, then fine. If not, we'll draw what conclusions we have to.'

Mr Berlusconi has promised the budget law will be submitted to parliament by the end of September. Unions say they do not dispute the overall savings figure but disagree with the balance between savings and cuts.

The Italian employers' body, Confindustria, whose chairman Luigi Abete also met Mr Berlusconi, welcomed the government's methods and objectives.

PALERMO (Reuter) - Magistrates are questioning drug company officials arrested for alleged fraud in the latest multi-million-pound scandal to hit Italy's health service, judicial sources said. The officials are suspected of overcharging hospitals.