After Standard & Poor's (MHP ) downgraded Italy's credit rating in July, the center-right government knew it had to take dramatic action. On Aug. 2 it approved $20.4 billion in spending cuts and $8.4 billion in one-time, revenue-raising measures to control the ballooning budget deficit. Italy's pragmatic new Finance Minister Domenico Siniscalco said the exact cuts would be hammered out in the fall, but they will inevitably pinch Italy's social welfare programs. Siniscalco also aims to sell $128 billion in state assets by 2008, including $20 billion this year. Sales could include the state's stake in utility Enel (EN ) and energy company ENI E ). This year's $29 billion savings would hold Italy's 2005 gap to 2.7% of gross domestic product, keeping the budget within the European Union's Growth & Stability Pact guidelines.
Edited by Patricia Kranz