The measures are meant to slash the cost of government, combat tax evasion and step up economic growth, so the country can eliminate its budget deficit by 2013. Mr. Monti took the steps in an emergency decree, which means they will take effect before he presents them to Parliament for formal approval.
Delivered ahead of a crucial summit meeting of European leaders this week, the new measures are aimed at showing that Italy — which is seen as both too big to fail and too big to bail out should it default on its immense debts — is committed to getting its finances in order.
The hope is that they will take some of the market pressure off Italy, whose borrowing costs have been pushed up in recent weeks to levels that have led other European countries to seek bailouts; once Italy has shown it is committed to austerity, the European Union can move ahead with broader plans to shore up the euro.
“If you want, call these the ‘Save Italy’ measures,” Mr. Monti said in a news conference after a cabinet meeting on Sunday, less than three weeks after taking office. “I wanted to give you a message of grave concern but also of great hope,” he told Italians, adding that he would work to spread the sacrifices with “equity” across the society.
A former European commissioner with no experience in the trenches of the Italian Parliament, Mr. Monti is expected to present the measures to both houses on Monday. Though the Parliament voted confidence in his government of technocrats by a wide margin last month, many legislators are reluctant to push through measures that might hinder their chances for re-election.
There are other hurdles as well. Labor unions are opposed to raising the retirement age, and industrialists say the measures are weighted too heavily toward tax increases that could stifle growth.
Mr. Monti, who is both prime minister and finance minister, faces the challenge of satisfying the demands of European leaders while making clear to Italians that they must take responsibility for solving the country’s longstanding structural problems.
“The huge public debt of Italy isn’t the fault of Europe; it’s the fault of Italians, because in the past we didn’t pay enough attention to the well-being of the young and the future adults of Italy,” Mr. Monti said. Speaking of his proposals, he said, “We have had to share the sacrifices, but we have made great efforts to share them fairly.”
Among the new measures announced Sunday are sharp cuts to regional governments that could significantly change Italian politics by crimping the flow of patronage spending.
There appears to be little room now for traditional Italian political maneuvering. Though Italy’s economy is the third-largest in the euro zone, it has no forward momentum; economists expect it to contract in 2012 and stay flat in 2013. Meanwhile, the cost of servicing the country’s debts is claiming an ever larger share of its budget.
Mr. Monti must also convince risk-averse Italians that there is much at stake. Silvio Berlusconi, who was prime minister until a few weeks ago, repeatedly told his countrymen that the economy was fine, even though youth unemployment was high and rising, growth was flat and prices were outstripping wages.
“You will never hear me ask for a sacrifice because Europe asks for it, just as you will never hear me blame Europe for things that we should do and that are unpopular,” Mr. Monti said. “I would rather be considered unpopular, rather than Europe, because you can do without me, but not without Europe.”
Mr. Monti’s proposals include reintroducing an unpopular property tax that Mr. Berlusconi abolished in 2008 to fulfill a campaign promise. The new measures would also prohibit cash transactions above 1,000 euros ($1,340), in the hope of making tax evasion harder; raise the country’s value-added tax by two points to 23 percent starting in September; and give incentives to businesses to hire new workers.
The country’s new welfare minister, Elsa Fornero, a pension expert, choked with emotion at the news conference as she explained how Italians would be asked to sacrifice today in order to make the pension system less “arbitrary” and “more equitable” for future generations.
The standard retirement age, now 60 for many women and 65 for most men, would quickly rise to 62 and 66, with incentives to keep working until age 70; the standard age for women would eventually rise to match that for men. Pensions would be based on the number of years of contributions, not on the worker’s salary at the time of retirement, as is common now.
Before the cabinet meeting, Emma Marcegaglia, the president of the business organization Confindustria, called the austerity measures “heavy but indispensable,” adding that “the next 10 days will decide whether the euro will survive or not.”
But Ms. Marcegaglia added that her group had asked the government to recalibrate the mixture of tax increases and spending cuts once the measures have been passed.
The leader of the center-left Democratic Party, which supports the Monti government, called for more measures to fight tax evasion, a very widespread problem in Italy.
Susanna Camusso, the president of CGIL, Italy’s largest labor union, said the austerity measures “deal a very harsh blow to the incomes of pensioners.” Raising the retirement age would be “unsustainable for so many workers who would see their retirement prospects shaken and delayed by many years of work.”
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