By Chiara Vasarri and Andrew Davis - Dec 5, 2011 3:39 AM GMT+0700
Italian Prime Minister Mario Monti announced 30 billion euros ($40 billion) of austerity and growth measures as he seeks to cut the euro-region’s second-biggest debt and prevent a breakup of the euro.
Monti’s Cabinet in Rome passed the measures a day earlier than planned as the new prime minister rushed to reassure investors he is serious about taming a debt of almost 1.9 trillion euros. The premier will present the package, which includes a tax on luxury goods, resurrects a property levy on first homes, and forces many workers to delay retirement, to both houses of parliament tomorrow.
“The huge public debt of Italy isn’t the fault of Europe, it’s the fault of Italians because in the past we didn’t pay enough attention to the well being of the young and the future adults of Italy,” Monti said at a press conference in Rome today after his Cabinet passed the package.
Monti, sworn in on Nov. 16 after Silvio Berlusconi resigned, is under pressure to move quickly as a selloff of the country’s bonds sent borrowing costs surging last month past the 7 percent threshold that led Greece, Ireland and Portugal to seek aid. Italy is seen as too big to bail out with 450 billion euros of bonds maturing in the next three years, more than the current size of the EU’s rescue fund.
‘Tough Package’
“It’s a very tough package, but we don’t have any choice except to pass it,” Emma Marcegaglia, head of employers’ lobby Confindustria, said in comments broadcast on Sky TG24 today after meeting with Monti. “The plan is key to saving Italy and preventing the collapse of the euro.”
The plan includes 20 billion euros of austerity measures and another 10 billion euro of proposals that aim to boost growth of an economy where expansion has lagged the European averaged for more than a decade.
The package touches on all aspects of Italian society with items aimed at shrinking the size of the government, raising the retirement age, forcing all transactions of more than 1,000 euros to be done electronically to fight tax evasion, an increase of the sales tax of two percentage points, and tax breaks for companies that hire young workers and women.
The Italian budget package comes at the start of a critical week for Europe’s efforts to end the debt crisis and prevent Italy and Spain from succumbing and causing a breakup of the single currency. German Chancellor Angela Merkel meets French President Nicolas Sarkozy tomorrow to advance a plan for stricter enforcement of the region’s deficit rules that will be presented to European Leaders at a summit on Dec. 8.
To contact the reporter on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net
To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net
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