The thing would be sad by itself, but some of the ancillary rules contained in the new law will have a devastating effect on basic research. I can only speak for particle physics, where I know how funds are spent. For the most part, funds in particle physics research are administered quite well in Italy, a result of the narrow margin within which researchers have to manouver; there are cases of abuse, but these are rare. Let us take the case of the participation to CERN and its experiments.
In order to participate in the large experiments at the CERN laboratory, over 1000 researchers based in Italian universities need to periodically travel to Geneva. Actually, the participation to the experiments forces researchers to make themselves available for week-long shifts at the data-taking, plus of course performing maintenance to the detector components they themselves built. Then there are meetings, working groups, etcetera -but these are not crucial activities, since they can be performed through remote videoconferencing.
Now, what does the new finance law says ? It says that effective June 1st, the per-diem compensation of researchers traveling abroad (some 120 euros per day, with which one should pay for lodging, meals, and all the rest) is zeroed. Only lodging expenses are refunded, and we do not yet know whether meals will be in some way paid back. Furthermore, the law states that the total expense of institutes such as INFN -the Italian Institute of Nuclear Physics that hired me- for missions abroad cannot exceed 50% of what was spent last year. Since we are in June, you can well understand how narrow a margin this leaves for travel abroad in 2010!
Now, since without Italian researchers the CERN experiments cannot run safely, unless they overburden with shifts the scientists from other countries, the matter poses a urgent problem. In principle, one might think that physicists do not work for a salary, but for the beauty of science: this would not be far from the truth in the case of Italian physicists, since their salary is about a third of that of our colleagues from the US, Germany, or many other countries. So we can expect that Italian researchers will bow their head and continue working abroad even if they spend more than what they earn. But I have my doubts.
The matter is made complicated by the fact that INFN promised quite a bit of support, in terms of available manpower, to the CERN experiments. These agreements will go unattended if the Italian government does not repair the awkward situation.
I will update this post as I receive more news on the situation.
UPDATE: two links.
The first link is to Peppe Liberti's blog, who translates in Italian part of the text above in a post on the same topic.
The second is the original text of the law (in Italian only, sorry). You can find the part of relevance to researchers traveling abroad in section 6, subparagraph 12.