Sept. 7 (Bloomberg) -- Italy may need a new budget-adjustment plan next month because a 54 billion-euro ($76 billion) austerity package to be voted on today won’t convince the European Central Bank to continue buying the nation’s bonds, the chairman of the Senate Finance Committee said.
“How long can the ECB continue to buy Italian Treasury bonds?” Mario Baldassarri said in an interview in Rome today. “We may need another adjustment in three, four weeks which will be the real answer to the European Commission and to markets.”
A revised austerity plan passed by Prime Minister Silvio Berlusconi’s Cabinet last night faces a confidence vote in the Senate at 8 p.m. The package includes an increase in value-added tax by one percentage point to 21 percent, a 3 percent levy on incomes over 300,000 euros and a higher retirement age for women. It amends a plan passed by the government last month to balance the budget in 2013, which was drafted to convince the ECB to buy the country’s bonds amid a surge in bond yields.
To ensure ECB continued, Italy may have to pass another package with more “spending cuts and not tax increases, structural reforms in terms of liberalization, privatizations, sales of public buildings and so on,” Baldassarri said.
The current plan relies excessively on projected proceeds from the fight against tax evasion, the lawmaker added.
“You cannot say ex-ante how much tax revenues will be, you can say that only ex-post, in three or four years, whenever you get evaders and you make them pay taxes,” he said.
Once the Senate passes the budget plan, the measure will have to be approved by the Chamber of Deputies, the lower house of Parliament. That vote could come as soon as this week.
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