Italy's Renzi 'saddened' by latest corruption scandal

BRUSSELS (Reuters) - Italian Prime Minister Matteo Renzi said on Thursday he was "saddened" by the latest corruption scandal which has seen the mayor of Venice and a crop of politicians including a former government minister arrested or placed under investigation.

Prosecutors issued warrants on Wednesday against 35 people including the Venice Mayor Giorgio Orsoni, a close aide to former Economy Minister Giulio Tremonti, and the former governor of the Veneto region Giancarlo Galan over a 5 billion euro (4.06 billion pounds) flood barrier project to protect the canal city.

Politicians are suspected of taking bribes and illicit party funding contributions to award contracts on the project in a scandal which broke less than a month after a similar corruption scandal linked to the Milan Expo 2015 project.

"I feel deep sadness," Renzi told reporters after a meeting with leaders of the Group of Seven world powers in Brussels.

"We will be acting in the coming hours and days on the issue of public works contracts, with the national anti-corruption authority and specific interventions," he said.

However, he offered no details and suggested that existing legislation was adequate to tackle the issue.

"The problem isn't the rules, the problem is the thieves," he said. "Let's stop saying that people steal because there are no rules, there are thieves because people steal and people who steal need to be got rid of."

He made no mention of the mayor of Venice Orsoni, who is at the centre of the scandal and from Renzi's own Democratic Party.

Corruption, a chronic problem in Italy, is a growing headache for Renzi and a distraction from the ambitious programme of economic and constitutional reforms he has promised over the coming months.

It has also given the anti-establishment 5-Star Movement of former comic Beppe Grillo fresh fuel for its attacks on the mainstream parties, all of which have been caught up in the recent wave of scandals.

The latest investigations have awakened memories of the so-called "Bribesville" scandal of the 1990s which brought the old party system in Italy crashing down but which appears to have done nothing to end the almost institutionalised corruption within Italian politics.

Based partly on evidence from police wiretaps, prosecutors believe they have uncovered a system of falsely inflated bills used to conceal payments to politicians to ensure that contracts for the project managed by a consortium called Consorzio Nuova Venezia went through smoothly.

Orsoni, now under house arrest, is suspected of receiving a total of 560,000 euros in illicit contributions to fund his election campaign in 2010, according to the 700-page prosecution document.

His lawyers have dismissed the charges as "hardly credible."

Galan, the former governor of the Veneto region and one of the oldest allies of former Prime Minister Silvio Berlusconi, is believed to have been paid what was effectively an annual salary by the consortium of 1 million euros as well as two separate payments of 900,000 euros each.

On Wednesday, he issued a statement denying any wrongdoing and saying he wanted to speak to prosecutors to clear his name.

Last month, prosecutors in Milan arrested seven people over alleged attempts to influence public tenders on building contracts for the 2015 Milan expo, which had been touted as a shop window for Italian excellence but whose image has now been badly tarnished.

In two separate cases, Claudio Scajola, former industry minister under Berlusconi, and Corrado Clini, former environment minister under Berlusconi's successor, Mario Monti were both arrested over corruption allegations.($1 = 0.7345 Euros)

(Writing by James Mackenzie; Editing by Robin Pomeroy)