ROME — Italian state film entity Cinecitta-Luce has announced it is on the brink of closure due to draconian arts funding cuts, prompting cries of consternation both within the local industry and from the international film community.

Cinecitta-Luce, located on the historic Cinecitta studios lot, comprises promotional, production and distribution activities, plus oversight of the vast Istituto Luce archives, a historical treasure trove, as part of its mission.

This government-funded entity is entirely separate from the partly-privatized Cinecitta Studios, which are not affected by the cuts.

After withstanding previous cuts in recent years, the Silvio Berlusconi-led government plans to slash the org.’s 2011 budget by 60% to €7.5 million ($10.5 million).

“That sum is not even enough to pay salaries, so all our activities would basically have to stop, meaning that unless things change we might as well close down,” Cinecitta-Luce managing director Luciano Sovena told Variety. “Of course, I am launching this appeal in hope that the government will come to its senses.”

One scenario that could bring Cinecitta-Luce more coin is a possible upcoming Italo film-funding tax, loosely based on the French model, that could draw levies from across all distribution platforms, including TV, pay-per-view, Web and homevideo, besides an already approved tax on movie tickets.

The Cinecitta-Luce crisis has erupted just as Italy culture czar Sandro Bondi, who has been under fire for not protecting the crumbling monuments at Pompeii, is expected to resign any day. So any attempt to solve it would be up to Bondi’s successor.

“We are hoping that our state of paralysis will be among the new culture minister’s top priority,” Sovena said.

Meanwhile, Italy’s film industry is rallying in defense of the country’s only promotional body for local cinema abroad, with helmers Bernardo Bertolucci, Paolo Sorrentino and Marco Bellocchio among those clamoring against its possible closure.

“Recent Venice Film Festival lineups stand as proof of how precious Cinecitta-Luce’s role is in bringing talented new directors to the fore,” said Lido topper Marco Mueller.

“We cannot imagine an adequate promotion of both classic and contemporary Italian cinema around the world without the possibility that Cinecitta-Luce be allowed to work in keeping within its own standards,” said Jytte Jensen, curator of the film department at New York’s MoMA, where a very well-received Bertolucci retro recently unspooled thanks to the now teetering Italo entity.