Italy Passes $40 Billion Austerity Plan

Although it has a parliamentary majority, the month-old technocratic government of Prime Minister Mario Monti called a confidence vote on the measures to avoid having to address scores of modifications proposed by the Northern League, once a pillar of former Prime Minister Silvio Berlusconi’s center-right coalition and now the loudest opposition party.

The measures — which have grown increasingly unpopular as the reality sets in for Italians — reinstate a property tax on first homes, among other tax increases; raise the retirement age to 66 for men and 62 for women by 2012; and raise the ceiling for cash transactions to $1,300, among other measures to crack down on tax evasion.

The government has said that it tried to spread the pain among all segments of society and not just hit what many call “the usual suspects” — taxpaying salaried employees who often take the brunt of tax increases because tax evasion among non-salaried workers is so high.

Mr. Monti — a former European commissioner and university president who must work with a Parliament whose largest bloc, the center-right, is eager for early elections to solidify its political standing — has said that the bywords of his government are “equity,” “rigor” and “growth.”

To stimulate growth — which remained flat at 0.3 percent in Italy over the past decade — the measures also provide tax incentives for businesses that hire women and people under 35 on permanent contracts. Business groups have called for even more sweeteners to prevent the economy from contracting further.

In a speech just before the vote, Mr. Monti underlined the need to orient European economic policies more toward growth, rather than just concentrating on fiscal discipline. Calling the measures a “proof of collective discipline,” Mr. Monti said that the package enabled Italy to hold its head high as it faces the undeniably serious European crisis.

Although Mr. Monti still enjoys broad political and popular support, the measures have become increasingly unpopular in a growing climate of economic uncertainty, in a country that is already in recession, and where salaries have remained flat in recent years while the cost of living has risen.

“I know that we all have to cooperate and that the measures were needed, but my feeling is that they always turn to the same people, like pensioners or those with low salaries,” said Maurizio Capecci, an unemployed 57-year-old who sells lottery tickets during the Christmas season in downtown Rome. “I think the government should have introduced a wealth tax. Why can’t those who have more give more, but for real?”

A strike called by labor unions shut down national transportation last week and more strikes are anticipated in the coming months to protest changes in pension rules and labor contracts.

Mr. Monti’s government has said that it is planning to tackle labor reform — long a third rail in Italian politics — in the new year.

Gaia Pianigiani contributed reporting.

Article source: http://www.nytimes.com/2011/12/23/world/europe/italy-passes-40-billion-austerity-plan.html?partner=rss&emc=rss