Italian Prime Minister Mario Monti faces a confidence vote in Parliament to speed passage of a 30 billion-euro ($39 billion) emergency budget plan aimed at spurring growth and convincing investors he can cut Europe’s second-biggest debt.
The Chamber of Deputies in Rome began the debate on the package at 10 a.m. before the confidence vote, which Monti’s government requested to end debate and force lawmakers to vote or risk the fall of the government. A final vote will be held in the lower house at 7:30 p.m., and then the package will pass to the Senate, which is set to give final approval on Dec. 23.
Monti has said the measures, which include an overhaul of the pension system, the reinstatement of a property tax on primary residences and measures to boost growth and fight tax evasion, will help protect Italy from the spread of 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.
“The package has some limits, a significant part of it is based on higher taxes, but it’s absolutely indispensable,” Emma Marcegaglia, head of employers’ lobby Confindustria, said yesterday in Rome at a presentation of the group’s new economic forecasts.
The euro-region’s third-largest economy has slipped into its fifth recession since 2001, Confindustria said. The group forecasts the Italian economy will contract 1.6 percent next year, after predicting growth of 0.2 percent in September.
Italian bonds gained for the first day in four yesterday after Spain sold more debt than forecast at a bond sale, easing concern about demand for new debt. The yield on Italy’s benchmark 10-year debt fell 17 basis points to 6.40 percent today. Before the Spanish sale, the Italian yield rose as high as 6.82 percent, approaching the 7 percent threshold that led Greece, Ireland and Portugal to seek bailouts.
“We are confident that markets will react positively to the efforts Italy is making, maybe not tomorrow, but the reduction in borrowing costs that we anticipate in the coming months will help spur the economy,” Monti told the Finance and Budget Committees of the Chamber of Deputies on Dec. 13. Europe must avoid internal conflicts between northern and southern countries over the debt crisis, Monti said today at a Rome conference.
The premier said yesterday that his government was working on a new package of measures that aim to spur economic growth, which has lagged behind the European Union average for more than a decade. He reiterated a pledge to open up closed professions and said he would go ahead with plans to overhaul labor market rules and the welfare system.
Monti, who took office a month ago as head of a so-called technical government without a political base in Parliament, is seeking to show investors he can tame a debt that is bigger than that of Spain, Greece, Portugal and Ireland combined. This week he accepted changes to the plan to ease a pension freeze and the impact of the property tax on families in a bid to build support before the vote.
The plan was changed this week to raise the threshold on pensions that will be frozen to about 1,400 euros a month, from just under 1,000 euros in the original package. Families paying the new property tax will get a 50-euro credit per child, the amendment says. Italians whose checking-account balances average less than 5,000 euros a year will no longer have to pay a 34-euro annual tax.
The government will cover the lost revenue by increasing the planned levy on Italians who took advantage of previous amnesties on tax evasion. The amendment will also add a tax surcharge on pensions of more than 200,000 euros a year and will impose a levy on property owned by Italians outside of Italy.
Monti won backing for his government of non-politicians last month in the parliament from most parties. While the budget plan has met criticism from Berlusconi and his People of Liberty Party, the former premier would risk a political vacuum at a time when Italy’s bonds are under pressure should his forces vote against the plan.