Monti unveils sweeping package of budget cuts

Monti unveils sweeping package of budget cuts

ROME- Reuters
Monti unveils sweeping package of budget cuts

Italy’s Prime Minister Mario Monti gives a press conference on Nov 30 in Brussels. Monti’s cabinet has approved a 30 million euro austerity package in a bid to cut debt. AFP photo

Prime Minister Mario Monti, boosted by positive market reaction, took a 30 billion euro austerity package to Italy’s parliament yesterday to help stem a debt crisis threatening to overwhelm the eurozone.

The cabinet approved the mix of tax rises, pension reforms and incentives to boost growth in a three-hour meeting on Dec 4, opening one of the most crucial weeks since the launch of the euro more than a decade ago.

The package, dubbed a “Save Italy” decree by Monti, aims to raise more than 10 billion euros ($13.4 billion) from a new property tax, impose a new tax on luxury items like yachts, raise value added tax, crack down on tax evasion and bring forward measures to increase the pension age.

The first comment from a European leader was positive. Dutch Prime Minister Mark Rutte, who met Monti in Rome yesterday morning, said he was “very impressed” by the package.

Most editorials yesterday praised Monti for biting the bullet in a difficult moment and for distributing the pain.

“There are times when you have to displease everyone and certainly, this, for Italy is one of those moments,” La Stampa said.

Corriere della Sera praised Monti for “participating in the sacrifices” of Italians by renouncing his salary as prime minister.

However, newspapers that backed Silvio Berlusconi derided the measures. “The government is crying while it screws us,” was the headline in the daily Libero.

This was a reference to Welfare Minister Elsa Fornero who broke down in tears while presenting measures on Sunday night, realising that it will mean an effective cut in income for many pensioners.

Start of a crucial week

The measures come before a crucial week in the debt crisis with European leaders due to meet on Thursday and Friday in Brussels to try to agree a broader rescue plan for the bloc.

Italy, the eurozone’s third-largest economy, has been at the center of the crisis since mid-year, when its borrowing costs began to approach the levels which forced Ireland, Greece and Portugal to seek an international bailout.

Packed into a single emergency decree, the measures take effect immediately, before formal parliamentary approval, but Monti will have to secure the backing of legislators within 60 days for them to remain in force.

Monti, appointed at the head of a technocrat government to replace Berlusconi last month, had been under growing pressure to come up with concrete measures to address fears about Italy’s towering debt mountain.

He has held to Berlusconi’s pledge of a balanced budget by 2013, despite growing signs that Italy is heading into a recession that will make it extremely difficult to make inroads into a public debt of 120 percent of gross domestic product (GDP).

Deputy Economy Minister Vittorio Grilli said the measures outlined on Sunday would allow the goal to be met despite a forecast that GDP would contract by 0.4-0.5 percent in 2012.

Unions criticized the package and in an early sign of possible opposition to the Monti government, FIM-CISL, a union representing metal workers, said it would call a two-hour strike on Dec. 7.

“Yet again, the sacrifices demanded fall mainly on salaried workers and pensioners and on the weaker sections of society,” the union said in a statement.