Italian lawmakers ponder more austerity measures

AP News
Posted: Sep 07, 2011 7:17 AM
Italian lawmakers ponder more austerity measures

Italian lawmakers studied last-minute adjustments to the government's hotly disputed austerity package ahead of a confidence vote Wednesday, measures that aim to reduce the deficit by more than euro54 billion ($70 billion) over three years.

Finance Minister Giulio Tremonti's office confirmed that the final changes, including pension reform that had been resisted by Premier Silvio Berlusconi's coalition allies, significantly increases the dent in Italy's deficit. Italian media reported the latest new taxes and spending cuts totaled euro4 billion ($5.7 billion).

The European Central Bank has demanded stiff austerity measures to calm financial markets nervous about Italy's credit worthiness. The ECB has spent billions in the last month buying up Italian government bonds to get Italy's borrowing costs lower and help them avoid becoming the next eurozone nation to need an international bailout.

When the deficit-battling package was unveiled by Premier Silvio Berlusconi on Aug. 12, the package added up to euro45.5 billion ($64.1 billion) But weeks of waffling by squabbling coalition allies whittled down the new or higher taxes and spending cuts, further shaking the markets' confidence, and the government beefed up the measures at a Cabinet meeting Tuesday.

"The decisions taken yesterday by the Cabinet have strengthened the measures significantly," Antonio Azzollini, the head of the Senate's budget committee, told the assembly.

Azzollini, from Berlusconi's party, said sales taxes on goods and many services would be raised from 20 percent to 21 percent, an additional income tax of 3 percent would be on levied on incomes exceeding euro300,000 (nearly $450,000), and the timetable for raising the retirement age for women would be speeded up from 2016 to 2014.

Berlusconi had originally shied away from putting the package to a vote of confidence in his government, but decided to speed up its passage after ECB president Jean-Claude Trichet, during a visit Saturday, appealed for quick, decisive action to save Italy's credit reputation.

If the vote fails, Berlusconi must resign. His center-right forces have a comfortable majority in the Senate, but some of that edge could be eroded if his squabbling allies object to the pension reform.