By Chiara Vasarri - Dec 4, 2011 9:38 PM GMT+0700
The Italian cabinet may approve today new budget cuts and tax increases valued at 24 billion euros ($32 billion) to shore up the country’s finances.
A cabinet meeting will be held at 4 p.m. in Rome to approve the package, according to a statement by the office of Italian Prime Minister Mario Monti.
Monti, sworn in on Nov. 16. after Silvio Berlusconi resigned amid the deepening debt crisis, is under pressure to reassure markets 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. Monti hasn’t yet disclosed details of the budget plan.
The budget plan will probably include an increase of the main income tax on the highest income bracket, new taxes on boats and other luxury goods and an overhaul of the pension system that will delay early retirement, two people with knowledge of the matter said today. They declined to be named because the plan is not public yet.
The government will also try to align the retirement age for women with that of men by 2018, the people said, adding that Monti also plans to re-introduce the so-called ICI tax on main properties to bring in at least 3.5 billion euros a year.
Monti also plans spending cuts to regions and other local administrations amounting to 5 billion euros while an immediate increase of the value-added tax has been ruled out, one of the people said. An additional 4 billion euros in savings could come from welfare system measures and automatic cuts to tax breaks approved by Berlusconi’s government, one of the people said.
Bonds Rally
Italian 10-year bonds last week rallied for the first week in eight as optimism that France and Germany are aligned on measures to stem the euro-area debt crisis boosted demand for the region’s higher-yielding assets.
Italian 10-year yields fell 58 basis points over the week to 6.68 percent, narrowing the yield difference over similar- maturity German bunds by 45 basis points to 4.55 percentage points.
Monti has met with representatives of the main political parties to build support as his government is scheduled to present the package to both chambers on Dec. 5.
Bitter Medicine
“Medicine is always bitter, but sometimes it’s necessary to prevent the patient from dying,” Pierferdinando Casini, head of the Union of Centrists party, said yesterday after meeting with Monti.
The measures the new government plans to take are “severe” and necessary to “make Italy better,” the leader of Berlusconi’s People of Liberty party, Angelino Alfano, said yesterday after the talks. “Monti has been called in precisely to take decisions which are far from easy, and we are aware of this,” he said.
The government’s proposals are ‘indigestible,” and “we are ready to counter the wrong decisions” that will be made, Susanna Camusso, head of Italy’s biggest union, CGIL, said yesterday.
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
Posts
No comments:
Post a Comment