Italian Prime Minister Silvio Berlusconi's government unveiled measures Friday to balance Italy's budget by 2013, a year earlier than planned, by slashing €45 billion in public spending in a bid to pull Italy back from the brink of the eurozone crisis.
The measures, composed of tax increases and spending cuts, seek to retool a fiscal-tightening package the government passed in July that disappointed investors, driving Italy's borrowing costs up to euro-era highs. Nearly all the cuts contained in the earlier package were due to kick in after elections in 2013, giving the next government leeway to unravel the measures and deepening investor worries over Italy's creditworthiness. The European Central Bank's decision to begin to buy Italian bonds this week helped restore funding to Italy's €1.9 trillion in public debt, but the help came with demands that Italy do more.
The measures unveiled Friday, which must be approved by Parliament, call for €20 billion in fiscal savings to take effect in 2012 while an additional €25 billion will kick in a year later. The plan also calls for an amendment to make balancing Italy's budget a constitutional duty. To generate cost-savings, the measures will slash ministry budgets and increase the capital-gains tax on all securities except government bonds to 20 per cent from 12.5 per cent. The government also plans to pass a two-year "solidarity" tax on annual incomes above €90,000 and to withhold €9.5 billion in funding to regional governments.
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