ITALIAN PRIME minister Silvio Berlusconi’s government yesterday approved a four-year €47 billion austerity package intended to reassure financial markets and European partners.
Prepared by Italian finance minister Giulio Tremonti, the package will come before parliament later this month.
The package consists of widespread cuts and savings, including: a public-service wage and hire freeze until 2014; the raising of the pensionable age; reductions in central and local government spending on social services; increases to minimum public health charges; and a crackdown on income-tax evasion and false pension claims.
Mr Tremonti, whose austerity plan had met such bitter opposition within the government that cabinet colleagues had pressurised him to resign rather than present it, denied yesterday that the measures had been watered down.
Speaking to the Financial Times, he said it was "absolutely the same as that designed by the treasury".
Extended over four years, the package involves cuts of €1.8 billion in 2011, €5.5 billion in 2012 and €20 billion in both 2013 and 2014.
The long-term aim of the package is to reduce the government budget deficit, expected to be 3.9 per cent this year and 2.7 per cent next year, to the extent that it will break even by 2014. Italy currently has a huge 120 per cent debt-to-GDP ratio, second only to Greece in the euro zone.
Giuseppe Vegas, head of Consob, the Italian stock market regulatory board, yesterday acknowledged that the combination of low growth, at 0.9 per cent, and huge public debt put Italy “at risk of contagion from the Greek crisis”. He argued, however, that Mr Tremonti’s package was designed to avoid that risk.
Inevitably, the package did not meet with universal approval. Pierluigi Bersani, leader of the main opposition party, the Democratic Party (PD), called it a “full-front attack on social services”, and described the provisions for 2013 and 2014 as “a time bomb”.
Commentators noted yesterday that €40 billion of the intended €47 billion in cuts were scheduled to come into effect in 2013 and 2014, by which time neither Mr Berlusconi nor Mr Tremonti may still be in power. The current legislature is scheduled to end in the spring of 2013.
In a further sign of internal tensions yesterday, the Northern League, a senior government ally, voted against an emergency cabinet decree intended to facilitate the city of Naples and the Campania region in solving an ongoing rubbish crisis.
With rubbish accumulated in the streets of Naples, the decree enables the Neapolitan authorities to “transfer” rubbish to other regions.