Monti’s Austerity Budget Cuts Win Broad Support in Italian Confidence Vote
Prime Minister Mario Monti won broad backing for his 30 billion-euro ($39 billion) emergency budget, setting up final passage next week of his plan to shield Italy from being overwhelmed by the region’s debt crisis.
The Chamber of Deputies gave its final approval last night in Rome by a vote of 402 to 75, with former Prime Minister Silvio Berlusconi’s People of Liberty Party and the Democratic Party both backing Monti. The plan now passes to the Senate, which will begin debate on Dec. 21 and hold a vote on Dec. 23.
“Without these emergency measures, what’s at risk is the savings of all Italians and the wellbeing accumulated by generations,” Monti told lawmakers before the final vote. “There is also the risk of seeing Italians’ income evaporate and the pension and public-health systems threatened.”
Monti has said the measures, which include an overhaul of the pension system, the reinstatement of a levy on primary residences and proposals to boost growth and fight tax evasion, will help protect Italy from the debt crisis and bring down record borrowing costs. The Treasury had to pay 6.47 percent to sell five-year debt on Dec. 14, the most in more than 14 years, and faces about 200 billion euros in bond maturities in 2012.
Italian bonds gave back early gains yesterday, with the yield on benchmark 10-year finishing up 2 basis points at 6.59 percent. That widened the difference with German bonds by 11 basis points to 474 basis points. The 10-year yield reached a euro-era record 7.48 percent on Nov. 9 and closed eight times in November above the 7 percent threshold that led Greece, Portugal and Ireland to seek bailouts.
The measures will put a further squeeze on income at a time when a slump in consumer spending may have already pushed the economy into its fifth recession since 2001.
Confindustria, the nation’s employers lobby, forecast this week that growth in the euro region’s third-largest economy will contract until the second half of next year. The group predicted the economy would shrink 1.6 percent in 2012. Confindustria also said that the government was on track to meet its goal of a balanced budget in 2013.
Monti told lawmakers not to underestimate measures in the package to spur growth and competition and said that his government is committed to approve more so-called structural reforms. His priorities would be an overhaul of labor laws to make it easier for young people and women to get jobs and opening up closed professions to spur competition and bring down prices, he said.
Tensions are mounting over the austerity package, which has provoked threats of violence against leading politicians and was linked to a letter-bomb campaign. Post-office officials yesterday intercepted threatening letters containing bullets addressed to Monti, Labor Minister Elsa Fornero, Berlusconi, Democratic Party leader Pier Luigi Bersani and some top newspaper editors.
“The budget plan is ready and so is your funeral,” one of the letters read, newspaper La Repubblica reported. “We will see you in Rome.”
The letter follows the explosion of a letter bomb on Dec. 9 claimed by an Italian anarchist group in an office of the tax collection authority Equitalia in Rome. The explosion left a worker there missing parts of two fingers and with injuries to his face. That attack came a day after another letter bomb, intercepted in Germany and addressed to Deutsche Bank Chief Executive Officer Josef Ackermann, was attributed to the same Italian group.
Unions held a three-hour general strike to protest the measures on Dec. 12 and more work stoppages are planned for the coming months. A public transport strike yesterday slowed traffic in Rome to a crawl.
Monti, who took office a month ago as head of an unelected government of non-politicians, is seeking to show investors he can tame a 1.9 trillion-euro debt, bigger than that of Spain, Greece, Portugal and Ireland combined. With no political base in parliament, Monti relies on support from both Berlusconi’s PDL and the Democratic Party, its chief rival, to remain in power.
“The concern that there is always going to be with having a technocrat in charge is that the other parties might try and gain political capital,” said Peter Chatwell, a fixed-income strategist at Credit Agricole SA in London. “So, as long as the technocrat remains well backed, that’s good for Italy and good for stability.”
Berlusconi criticized the austerity plan Dec. 15 and warned that the Monti government may not last until the end of the legislature in 2013. He pledged to vote in favor of the measure because “in an emergency you have to choose the lesser evil,” he said at a book presentation in Rome.
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