Tuesday

22nd Aug 2017

Italy approves more cuts as recession worsens

  • Rome's borrowing costs are on the rise again (Photo: Giampaolo Macorig)

Italian Prime Minister Mario Monti won a confidence vote on Tuesday (7 August) linked to another €4.5 billion worth of spending cuts aimed at convincing investors that Italy's economy is sound.

But fresh data shows a worsening recession and rising borrowing costs.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The bill - which comes on top of previous spending cuts amounting to a total of €26 billion by 2014 - was approved with 371 MPs, while 86 said No and 22 abstained.

The €4.5 billion worth of cutbacks will be implemented by the end of this year. The remaining €21.5 billion are to be spread out over the next years.

Thousands of hospital beds are to be slashed and 20 percent of top public officials to be fired as part of the austerity drive.

Meanwhile, fresh data shows that Italy's gross domestic product shrunk by 0.7 percent in the April-June period compared to the previous three months.

Italy's borrowing costs for the benchmark 10-year bond are also above six percent, less than one percent short of what is considered bailout territory.

Monti in recent months relentlessly pushed for a "semi-automatic" intervention by the eurozone's bailout funds and the European Central Bank (ECB) when countries, such as Italy and Spain, do the right thing but pay too much interests on their bonds.

Germany oppses the idea and insists that countries need to sign up to a formal programme - as Ireland, Portugal and Greece did when they got bailouts - however.

Concessions obtained by the Italian technocrat - a respected economics professor and a former EU commissioner - have so far failed to impress markets.

An ECB bond-buying action announced by the bank's chief Mario Draghi, also an Italian economist, was in the end delayed by the German central bank until September.

Tuesday's vote in Italy is important given Monti's recent troubles in gathering support for further austerity measures, particularly from the party of former prime minister Silvio Berlusconi, who is testing waters for a political comeback.

An interview in the Wall Street Journal published on Monday in which Monti said the borrowing costs would have been even higher if Berlusconi was still in power, did not help.

Berlusconi's party decided to vote against the austerity package, with one of their MPs, Pietro Laffranco, explaining that Monti had "said a big stupid thing and we wanted to send a signal."

Monti apologised for the remarks.

He also had to water down statements made on Monday in another interview, with German magazine Der Spiegel.

"The autonomy of the parliament in relation to the executive is not up for debate," he said, after having told the German magazine that governments need more negotiating room from parliaments when dealing with euro-crisis measures.

His remarks were promptly rebuffed in Germany, where the Bundestag's powers over the government are such that Chancellor Angela Merkel has to phone key MPs during summits when money is at stake.

"The Chancellor's view is that we have always got along fine in Germany with the correct degree of support by parliament and the correct degree of parliamentary participation," Merkel's spokesman Georg Streiter said on Monday.

German foreign minister Guido Westerwelle also said there is need for "a strengthening, not a weakening of democratic legitimacy in Europe."

Italy debt rating downgraded

US ratings agency Moody's has cut Italy's debt rating by two notches citing a contagion risk from Spain and Greece as the eurozone crisis continues to rage.

Germany gets its way on ECB bond-buying

The ECB has said it "may" buy Spanish and Italian bonds, but only if governments first sign reform pledges with the eurozone's bailout fund - a German demand.

Eurozone recession to continue in 2013

The eurozone economy will shrink by a further 0.3 per cent in 2013, the European Commission has said. The bloc will have to wait until 2014 before seeing economic growth.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Austria has begun checks at Italian border
  2. Slovenian PM: Brexit talks will take longer than expected
  3. Merkel backs diesel while report warns of economic harm
  4. UK to publish new Brexit papers this week
  5. Macedonia sacks top prosecutor over wiretap scandal
  6. ECB concerned stronger euro could derail economic recovery
  7. Mixed Irish reactions to post-Brexit border proposal
  8. European Union returns to 2 percent growth

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference