Silvio Berlusconi'sgovernment has announced that it will hand out around Euros 74m to the localproduction sector in 2005. Local producers now hope that the government promisewill finally put an end to a crippling two-year freeze in state subsidies.

Around Euros 54m will beawarded to support feature-length films that are deemed of "nationalcultural interest," and Euros 18m will be handed out to first and secondfeatures. The government also said it will award Euros 1.6m to short films, andEuros 375,000 to support the development of 15 screenplays.

While Euros73,975,000 will go to the production sector, the remaining Euros 9.7m will be usedto promote films in Italy and abroad, to subsidise tickets, and to support the nationalfilm school and fringe cinemas.

The crisis thathas rocked the Italian film sector for the last two years is so bad that localfilm production is expected to drop by 70% in 2005, with Italy producing only28 films, down from the 95 pictures that were made in 2003.

Local producersand distributors blame endless delays in handing out money to projects thathave already been greenlit, as well as massive cuts to state funds, and a lackof government-backed financial incentives.

Around 40established directors are currently still awaiting government funds which hadbeen awarded in 2003, for a total of Euros 92m. A group of first timedirectors, known as Gruppo 16/12, have taken legal action against thegovernment, after being told there were insufficient funds to finance their 20features which had been awarded public funds over a year ago. Filmmakers wereinvited to reapply for funding this year.

The government slashed itsfund for the entertainment industry - which comprises film, theatre, dance andopera - from 575m in 2003 to Euros 464,5m in 2005.