25th Oct 2016

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.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

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."


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

Stakeholders' Highlights

  1. EFADraft Bill for a 2nd Scottish Independence Referendum
  2. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  3. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  4. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  5. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  6. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  7. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  8. Dialogue PlatformIs Jihadism Blind Spot of Western Intellectuals ? Wednesday 26 October
  9. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum
  10. Crowdsourcing Week EuropeMaster Crowdsourcing, Crowdfunding and Innovation! Conference 21 November - 10% Discount Code CSWEU16
  11. EJCEU Parliament's Roadmap for Relations with Iran a Massive Missed Opportunity
  12. Nordic Council of MinistersFish Skin on Bare Skin: Turning Fish Waste into Sustainable Fashion