ROME (Reuters) - Italy's cabinet proposed legislation on Friday to gradually abolish state financing of political parties by 2017, gradually replacing the current system with financing by private citizens.

The popularity of Italy's parties has been eroded by decades of wasteful spending and corruption and moves to abolish their funding with taxpayers' money have wide public support.

It was a signature policy proposal of the anti-establishment 5-Star Movement, which won a quarter of the votes in February's election and accepts no contribution from the state.

The 5-Star Movement plays no part in the broad left-right coalition government of Prime Minister Enrico Letta.

A referendum to scrap party financing was overwhelmingly passed in 1993 but its outcome was substantially ignored. The previous form of direct financing was replaced with generous reimbursements of money parties spent in election campaigns.

Under the government's bill, which must be passed by both houses of parliament, current public financing would be reduced by 40 percent in the first year after the law is passed, 50 percent in the second year and 60 percent in the third.

In the fourth year state financing would be fully phased out.

When the new system of private financing is in place, citizens who choose to make contributions to political parties will be able to deduct the payments from their taxes.

Letta told reporters he hoped parliament would approve the bill quickly.

"It's a step that the citizens are expecting and it is important for the credibility of the system because in future the parties will have to convince citizens to finance them," he said.

(Reporting by Gavin Jones; editing by Andrew Roche)


Due to the overwhelming enthusiasm of our readers it has become necessary to transfer our commenting system to a more scalable system in order handle the content.