Italy Approves Budget Adjustment Designed to Lower Deficit by $33 Billion

Italy’s Chamber of Deputies voted to give final approval to a two-year budget adjustment aimed at cutting the deficit by 25 billion euros ($32.7 billion).

The spending package aims to lower the shortfall below the European Union’s ceiling of 3 percent of gross domestic product by the end of 2012.

Regional governments must reduce spending by 4.5 billion euros next year and 4 billion euros in 2012. About 5 billion euros will come from a three-year freeze on public salaries and limiting hiring in the next two years. Other steps include salary cuts for the highest-paid members of the public administration and fighting tax evasion.

Standard & Poor’s today said the budget cuts support the country’s A+ rating on long-term debt, according to a statement.

“If consolidation efforts are delayed or hampered by fiscal slippage, the long- and short-term sovereign ratings could come under downward pressure,” S&P said.

To contact the reporter on this story: Steve Scherer in Rome at sscherer@bloomberg.net

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