Debt sacks Rome: Italy adopts draconian austerity measures

Debt sacks Rome: Italy adopts draconian austerity measures


The Extinction Protocol


August 13, 2011 – ROME
Prime Minister Silvio Berlusconi announced a painful mix of tax
increases and spending cuts on Friday to meet European Central Bank
demands for action on shoring up Italy’s strained public finances. At an
emergency evening cabinet meeting, the government adopted an austerity
package worth 20 billion euros in 2012 and a further 25.5 billion euros
the following year to bring the budget into balance in 2013. The
measures ranged from a special levy on incomes above 90,000 euros to
higher taxes on income from financial investments and cuts in the cost
of government, notably through a cull in the number of local
politicians. The ECB demanded accelerated deficit cuts from Italy as a
condition for buying its bonds on the market after a sell-off sent
Italian borrowing costs soaring and threatened to put the euro zone’s
debt crisis on a new, unmanageable plane. Berlusconi, who frequently
boasts of “never putting his hand in the pockets of Italians”, said he
agreed to the tax increases only reluctantly and the decision made his
“heart drip blood”. We are personally very pained to have to adopt these
measures,” he told reporters after the cabinet had approved the plan.
After days of criticism for a lack of clarity over how it intended to
meet the balanced budget target, Berlusconi and Economy Minister Giulio
Tremonti delivered a harsh dose of austerity for Italy’s fragile
economy. Before the announcement, Italy’s biggest unions had pledged to
oppose measures which hurt ordinary Italians including pensioners. “The
tax hikes certainly won’t help the economy, which is already stagnating,
and consumer confidence is sure to fall further,” said Raj Badiani, an
economist at IHS Global Insight. “The new fiscal measures appear to be
credible, but the real problem is on the reform front. We need a
timeline for measures to liberalize the service sector and labour
markets.” -Reuters






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