Italy's Premier Monti taking package of austerity, growth measures to Parliament on Monday; package includes €20B in spending cuts and tax hikes, €10B in measures to boost growth
December 5, 2011
– Italy's Premier Mario Monti takes a package of austerity and growth-boosting measures to a skeptical Parliament on Monday as Europe enters a crucial week aimed at saving the euro.
Monti is to brief both Parliament chambers on the package, which includes euro20 billion ($27 billion) of spending cuts and tax hikes, and euro10 billion of measures to boost Italy's anemic growth.
His government agreed Sunday to slap taxes on property and luxury goods, increase the age at which retirees can draw pensions, trim the cost of Italy's political class and give incentives to companies that hire women and young workers.
While the package was passed as a government decree, Parliament must approve it.
Unions blasted the pension reform as "socially unbearable," and politicians on all sides said the measures were severe and that they weren't convinced.
But they appeared resigned to "holding our nose and voting," as Maurizio Sacconi, a labor minister under ex-Premier Silvio Berlusconi, put it.
Markets appeared to welcome the measures: The yield on Italian 10-year bonds was down 0.21 percentage points at 6.35 percent Monday morning.
And Olli Rehn, European commissioner for economic and monetary affairs, welcomed the package as "a very important step to shore up the public finances and support economic growth, while preserving social equity and fairness."
He said the "timely and ambitious" package gives a much-needed new signal of economic decision-making.
Monti, a former EU commissioner, has been under extreme pressure to come up with speedy and credible measures that will persuade markets to stop betting against the common currency. Italian borrowing costs have spiked, which could spell disaster if Italy is unable to keep up on payments to service its enormous debt of euro1.9 trillion ($2.6 trillion), which is equivalent to 120 percent of its GDP.
Unlike Greece, Portugal and Ireland, which got bailouts after their borrowing rates skyrocketed over 7 percent, the eurozone's third-largest economy is considered to be too big to bail out. An Italian default would be disastrous for the 17-member eurozone and would likely have damaging consequences throughout the global economy.
On Friday, eurozone leaders will meet at a critical summit aimed at preventing the collapse of the common currency; expectations are growing that they will agree to a tighter integration of the 17 EU countries that use the euro.
Monti said Sunday that the package was designed to be as fair as possible so that the sacrifices are equally shared; he himself said he would renounce his own salary as premier and economy minister.
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