Saturday

21st Jan 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.

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."

EU should raise own taxes, says report

A group chaired by former Italian PM and EU commissioner Mario Monti says Brexit should be used to create EU-level levies to depend less on member states contributions, and to abolish member states rebates in the EU budget.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey