Tags: Italy | Senate | Austerity

Italy's Senate Approves Government Austerity Plan

Wednesday, 07 Sep 2011 03:02 PM

Italy's Senate on Wednesday approved the government's disputed austerity package aimed at reducing the country's deficit by more than 54 billion euros ($76 billion) over three years.

The upper chamber voted 165-141, with three abstentions, to approve the package, which was put to a confidence vote to ensure Premier Silvio Berlusconi's allies united behind him after weeks of bickering over details of the plan.

Had the vote failed, Berlusconi would have been forced to resign, a prospect lawmakers clearly wanted to avoid given the nervousness with which financial markets have viewed Italy's ability to rein in its debt and spur growth.

The European Central Bank had demanded stiff austerity measures to calm the markets. It has spent billions over the last month buying up Italian government bonds to get Italy's borrowing costs lower and help them avoid becoming the next euro zone nation to need an international bailout.

The package now goes to the lower Chamber of Deputies, where Berlusconi also maintains a majority.

Finance Minister Giulio Tremonti's office confirmed that the final changes in the plan, including pension reform that had been resisted by Berlusconi's coalition allies, significantly increases the dent in Italy's deficit. Italian media reported the latest new taxes and spending cuts totaled 4 billion euros ($5.7 billion).

When the deficit-battling package was first unveiled Aug. 12, the package added up to 45.5 billion euros ($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 300,000 euros (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 European Central Bank President Jean-Claude Trichet, during a visit Saturday, appealed for quick, decisive action to save Italy's credit reputation.

© 2015 Thomson/Reuters. All rights reserved.

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