July 25, 2012 / 5:36 PM / 5 years ago

Sicily to delay paying lawmaker salaries, pensions

* Southern Italy region to delay payments until Rome pays up

* Regional economy minister cites “big tensions on finances”

* Sicily emblematic of Italy’s debt crunch

By Giselda Vagnoni

ROME, July 25 (Reuters) - Sicily will delay paying salaries to regional parliamentarians and postpone payouts to pensioners until the southern region, a focus of Italy’s financial crisis, receives money promised by central government in Rome.

Italy is at the centre of the euro zone crisis, with the cost of servicing its huge debts jumping on contagion fears as the situation in Spain deteriorates, and Sicily is emblematic of mounting concerns about the financial stability of Italy’s regional and city governments.

Prime Minister Mario Monti noted serious concerns last week about the possibility that Sicily, which accounts for about 5.5 percent of Italy’s gross domestic product, would default.

The autonomous island region has some 5.3 billion euros ($6.4 billion) 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.

The region’s economy minister Gaetano Armao told Reuters on Wednesday that salaries and severance payments for employees heading into retirement would be postponed by a few days, which he said was due to “big tensions on finances” caused by delays in state transfers to the region.

He said that Rome would soon transfer 400 million euros of funds for underdeveloped areas, 240 million euros for healthcare and an additional 100 million euros.

Monti met Sicilian authorities on Tuesday, ordering a compulsory plan to overhaul the region’s bloated public administration and restore financial stability.

In return for the release of state funds, authorities have promised to draw up a plan to reduce public administration costs, including staff cuts, by the end of July.

Armao has characterised Sicily’s situation as one of “financial tension” and not default.

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 Rome’s Senate to protest against the cuts which they say will force them to curtail vital local services.

The Court of Accounts, 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. ($1 = 0.8248 euros) (Writing by Catherine Hornby; Editing by Louise Ireland)

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