ROME - Italy's powerful employers' federation has sounded alarm bells about the country's economic underperformance, describing it as more serious than at any time since 1945 and accusing the centre-right government of failing to find remedies.

"When a country hasn't grown for 15 years, has lower productivity than its European partners, sluggish investment, a falling share of exports, stagnant output, labour costs higher than other countries and companies that remain small despite all the slogans, and is not among the top five European investors in China and India, how should we define this situation?" asked Luca Cordero di Montezemolo, who heads Confindustria and is chairman of Fiat, the carmaker.

"Without being too pessimistic, I can't remember such a negative collection of indicators on all fronts since the second world war," he told a conference.

He was speaking as the government prepared to push through parliament a 2005 budget that includes income tax cuts based on what economists believe are over-optimistic growth forecasts. Among other things, the government is counting on economic growth next year of 2.1 per cent. But Confindustria yesterday slashed its 2005 growth forecast to 1.4 per cent from 2 per cent, suggesting the higher revenue from a stronger economy might not materialise.

Italy's economy barely grew in 2002 and 2003 and is expected to expand by about 1.2-1.4 per cent this year. The government of Silvio Berlusconi, the prime minister, has called a vote of confidence in itself in the Senate to cut short debate on its 2005 budget and ensure it is approved before the legislative deadline of December 31.

Mr Berlusconi has described the budget as a turning point because it seeks to reverse decades of high taxation by incorporating €6.5bn ($8.6bn, £4.5bn) of tax cuts, with more reductions in 2006.

Both the International Monetary Fund and the European Commission and financial markets have expressed concern about Italy's budgetary discipline.

The government this week reinstated €160m in the budget for forest service workers in the southern region of Calabria, who held strikes last week after discovering the government planned to eliminate funds for the forestry department.

For its part, Confindustria has criticised the government for cutting corporate tax next year by only €500m. "This government does not seem to have accepted our invitation to conduct a policy of economic development and to attend to the competitiveness of our productive system. The budget is the proof," said Andrea Pininfarina, vice-chairman of Confindustria.