Monti to lawmakers: No alternative to reforms

AP News
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Posted: Dec 05, 2011 2:25 PM
Monti to lawmakers: No alternative to reforms

Italy's new premier urged Parliament on Monday to swiftly approve his anti-crisis package, including new taxes and pension reforms, warning that the survival of the euro depends on whether the nation makes "strong sacrifices."

Premier Mario Monti, an economist whose technocratic government came into office last month to save Italy from financial disaster, must depend on Parliament's political parties for his success. But the reaction from Italian lawmakers was mixed, even cool, and he was even heckled at times during his appeal.

He told the Chamber of Deputies "there are no alternatives" to the emergency package, which includes euro30 billion ($40.5 billion) in spending cuts and tax hikes, of which euro10 billion ($13.5 billion) would be invested in growth-boosting measures for Italy's flat econony..

The reforms were adopted late Sunday by his Cabinet and go into immediate effect but must be passed within 60 days by Parliament or they expire.

Failure to approve the measures would push Italy "into the abyss," Monti warned in a solemn, almost grim voice.

"The eyes of Europe and the world are concentrated on Italy and this hall," the premier added, before renewing the appeal in the Senate, Parliament's upper chamber. "The future of the euro also depends on the choices Italy will make."

Monti pledged that the "strong sacrifices" would be "limited in time, distributed fairly and essential to navigate this difficult moment for society."

Measures sure to be widely unpopular include making Italians work more years before drawing pensions, reviving a home property tax and raising the sales tax next September to 23 percent from 21 percent now.

The package apparently pleased the markets. The main stock index in Milan closed 2.9 percent higher, while Italy's benchmark 10-year bond yield dropped sharply, from 6.65 percent on the open to 5.93 percent.

"Without this package, we believe Italy would collapse, Italy would go into a situation like that of Greece, a country we admire but we don't want to imitate," Monti told the Foreign Press Association.

He also promised more reforms later, including opening up Italy's rigid labor market.

But several leading lawmakers from Italy's two biggest parties _ center-right and center-left _ were critical, although they stopped short of refusing to support Monti's measures.

Italian borrowing costs have spiked in the last few months, making it more challenging for Italy to keep up the payments to service its enormous euro1.9 trillion ($2.6 trillion) debt.

Greece, Portugal and Ireland had to get bailouts after their borrowing rates skyrocketed over 7 percent but Italy, the eurozone's third-largest economy, is considered too big to be bailed out. An Italian default would be disastrous for the 17-nation eurozone and could send both Europe and the United States into recessions.

Lawmaker Fabrizio Cicchitto made plain his party's displeasure over the return of property taxes on primary residences that former Premier Silvio Berlusconi had abolished.

"We wouldn't have brought back the property tax," Cicchitto said.

Parliament gave Monti's new government an overwhelming vote of confidence as it took office in November, but the new premier hasn't said if he will put the anti-crisis package itself to a confidence vote. Losing that vote would force his resignation and risk sending Italy's financial credibility crashing.

Cicchitto was noncommittal on whether Berlusconi's party would back a confidence vote on the crisis measures. "We'll study the request if and when it comes," he said.

Berlusconi's former labor minister, Maurizio Sacconi, said many lawmakers were resigned to "holding our nose and voting" in favor.

Democratic Party official Dario Franceschini said Monti should have "aimed more at fairness, with more gradual pension reforms, greater tax breaks for primary residences, and hit wealth and financial markets income harder."

Centrist leader Pier Ferdinando Casini urged fellow lawmakers to put aside their grumbling for "the common good" of Italy.

"Neither the right nor the left would have done would that this government is doing, taking on the task of doing what politics didn't know how to do," Casini said.

Lawmakers are in a squeeze. If they fail to approve the measures, they could be blamed if Italy collapses into financial disaster. If they approve such harsh measures, they risk the wrath of voters. Elections are due in spring 2013. Monti has said he will consider his job done when Parliament's term runs out then.

Monti warned, in TV interviews with the press, including The Associated Press, that failure to toughen Italy's generous retirement system might bring the day when pensions "would maybe cease to be paid."

Among the government's measures are taxes on luxury items like yachts, high-performance cars and private airplanes, slashing the costs of Italy's political class and incentives to companies that hire women and young workers. The measures raise the pension age to 66 for men in 2012 and for women by 2018, and also increases to 42 years and one month for a man to retire with full benefits, 41 years and one month for a woman.

Monti acknowledged that the measures might aggravate Italy's looming recession _ the government has forecast an economic contraction of up to 0.5 percent next year _ but said the reduction in Italy's borrowing costs would be a more significant achievement.

Unions blasted the pension reforms as "socially unbearable" and announced a strike for Dec. 12.

On Friday, eurozone leaders are holding a critical summit to prevent the collapse of the common currency. Expectations are growing that they will agree to a tighter integration of the 17 European Union nations that use the euro.

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Barry reported from Milan. Nicole Winfield contributed from Rome.