Italy’s Senate is set to give final approval tomorrow to Prime Minister Mario Monti’s 30 billion- euro ($39 billion) emergency budget plan after the government requested a confidence vote on the legislation.
The ballot in the upper house will take place at about 2:15 p.m. in Rome following an address to lawmakers by Monti, Senate Speaker Renato Schifani said today. The lower house Chamber of Deputies passed the package, Italy’s third round of austerity since June, in a 402-to-75 vote last week.
The plan includes a pension overhaul, a levy on primary residences and a crackdown on tax cheats, all measures aimed at stemming surging borrowing costs and convincing investors that Monti is serious about cutting the euro region’s second-largest debt. It may also push Italy deeper into a recession projected to begin in the current quarter after the economy contracted in the three months through September.
“We had to act in a hurry,” Labor and Welfare Minister Elsa Fornero told state-run television RAI in an interview. “We have been called to the sick-bed of a very ill man,” she said, referring to Italian public finances. The Cabinet first approved the budget plan as a decree on Dec. 4.
Monti, who leads an administration made of unelected ministers, may rely on the support of former Prime Minister Silvio Berlusconi’s People of Liberty party and the Democratic Party, Parliament’s main groups. A confidence vote ends debate on a bill and Italian premiers use them to ensure approval of legislation by staking the government’s survival on the outcome.
The vote comes one day after the International Monetary Fund concluded a short visit to Rome as part of its monitoring program. The two-person IMF team “received updates on budgetary developments” and discussed the missions “requested by the Italian authorities” that will take place early next year, the Washington-based lender said today in a statement.
Italy’s economy shrank 0.2 percent in the third quarter from the previous three months, when it grew 0.3 percent, national statistics institute Istat said today. The government forecasts a shrinking economy in the fourth quarter, 0.6 percent growth in 2011 and a 0.4 percent contraction in 2012.
The yield on the benchmark 10-year bond rose to 6.78 percent today, up 22 basis points from yesterday. The difference with equivalent-maturity German bonds widened 19 basis points to 485 basis points.
Italy’s 10-year yield reached a euro-era record 7.48 percent on Nov. 9, three months after the ECB started buying the country’s bonds to fight the region’s debt crisis. The Treasury had to pay 6.47 percent to sell five-year debt on Dec. 14, the most in more than 14 years.
Italy has to repay about 53 billion euros in the first quarter from the region’s total maturing debt of 157 billion euros, according to UBS AG. It owes a further 3.2 billion euros in interest payments based on the average five-year yield of the past three months.
Monti’s emergency package, which also aims to balance the budget in 2013, will cut 0.5 percent from gross domestic product over the next two years while reducing public debt, Bank of Italy Governor Ignazio Visco told Parliament on Dec. 9. Some of the drag on growth may be offset if borrowing costs are brought down, he said.
Italy will remain in a recession until the second half of next year, employers’ lobby Confindustria said in a Dec. 15 report. The $2.3 trillion economy will contract 1.6 percent in 2012 after growing 0.5 percent this year, the lobby said.
Monti said last week his government is preparing a plan to spur economic growth led by Development Minister Corrado Passera, a former chief executive officer of Intesa Sanpaolo SpA (ISP), Italy’s second-biggest bank. The plan will seek to overhaul labor laws and the welfare system, Monti said.
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