Italy plans 20-25 billion euro austerity measures: sources

Reuters News
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Posted: Dec 02, 2011 3:44 PM
Italy plans 20-25 billion euro austerity measures: sources

By Giuseppe Fonte

ROME (Reuters) - Mario Monti's government will unveil austerity measures totaling 20-25 billion euros over the next two years on Monday, government sources said, as Italy seeks to shore up public finances but also help growth to head off an acute debt crisis.

About 10-12 billion euros of the total will be used to cut the budget deficit, the sources said, aimed at ensuring Italy meets its goal of balancing the budget in 2013 despite a steep economic downturn and rapidly rising borrowing costs.

The remainder will free up resources to try to re-generate Italy's recession-bound economy.

Italy's cabinet is set to meet on Monday to approve the measures, the prime minister's office said in a statement, adding that two news conferences would be held immediately afterwards - one for foreign reporters - to detail the plans.

The package will then be presented to the lower house of parliament at 1500 GMT and to the Senate at 1700 GMT, the statement said.

Measures are expected to include extending the retirement age for many workers, liberalizing professional services and new taxes on private assets.

Monday's announcement will be a vital step for re-establishing Italy's shattered credibility with financial markets after a series of unfulfilled reform promises by the previous centre-right government.

Monti has said the program is aimed at ensuring Italy's deficit cutting goals can be reached even as growth prospects worsen in the euro zone's third largest economy.

Italy, one of the world's most heavily indebted and slowest growing economies, faces the prospect of recession next year, with the Organization for Economic Cooperation and Development forecasting gross domestic product will contract by 0.5 percent.

CUTS, TAXES

Under the new reform plan, programmed cuts to the national health service budget will be accelerated by one year, to reduce spending by 2.5 billion euros in 2012 and 5 billion euros from 2013, according to a local government source.

The maximum limit for cash transactions, currently at 2,500 euros, will probably be reduced to 500 euros, a government source said.

Ministers are also considering raising income taxes on higher income brackets and hiking taxes on boats and other luxury goods.

Political sources said a local housing tax (ICI) abolished by Berlusconi's government will also be reintroduced, bringing in estimated revenue of at least 3.5 billion euros per year.

Changes to pensions will be key, with eligibility requirements toughened up for so-called seniority pensions which are based on a combination of workers' age and the years for which they have paid contributions.

(Writing by Catherine Hornby; Editing by Andrew Heavens)