Sunday

24th Jul 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."

EU to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event Agenda for 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels

Latest News

  1. Munich attack might not have been terrorism
  2. A very British (and Corbynite) coup
  3. Poland 'changing for the worse' for Muslims and refugees
  4. EU aims to lift visas on Turks despite purge
  5. ECB in ‘bail-out’ of scandal-tainted VW
  6. EU failed to learn lesson from Brexit, Poland says
  7. UK accord on EU workers 'crucial', France says
  8. EU and US take different lines on Turkey crackdown