Italy rushes to reform budget | Pakistan Today

Italy rushes to reform budget

Italian borrowing rates spiked on Thursday just as parliament rushed to adopt huge budget cuts to save the economy, the third-biggest in the eurozone, from being dragged down by the debt crisis The bond auction was successful but the rate on 15-year bonds rose to 5.90 percent — the highest level since the introduction of the euro, indicating investor unease following days of market turmoil and political uncertainty. The rate on five-year bonds was at its highest level since June 2008.
The Senate, or upper house of parliament, was expected to give initial approval to a four-year crash austerity plan now raised to an estimated 47 billion euros ($67 billion) from 40 billion euros after investor pressure.
Italy has one of the highest debt levels in the world and one of the lowest growth rates in Europe and reports of infighting between Prime Minister Silvio Berlusconi and Economy Minister Giulio Tremonti have spooked investors. “If we don’t have a balanced budget then public debt — a monster from our past — would devour our future and the future of our children. The world is watching us,” Tremonti told parliamentarians ahead of the Senate vote. He also warned other European governments on the fallout of the crisis. “There should be no illusions about who will be saved. Like on the Titanic, the first class passengers won’t be able to save themselves,” he said. Tremonti proposed introducing a constitutional provision that would force Italian governments to keep balanced budgets — a measure already in force in Germany that President Nicolas Sarkozy is also trying to enact in France.
Business daily Il Sole 24 Ore said that “the nightmare of one of Europe’s founding states defaulting… has set off a strong and targeted reaction” from Italy’s parliament, which is approving the austerity budget in record time. The lower house of parliament is set to give its final approval on Friday. The main centre-left opposition Democratic Party has said it will vote against the programme but will not impeded its passage through parliament. It has called for fresh elections after the approval of the austerity plan. Opposition leaders said Berlusconi had lost his credibility over the crisis. The austerity plan is aimed at bringing Italy’s budget deficit down to 0.2 percent of gross domestic product by 2014 from 4.6 percent last year.

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