January 20, 2022

Italian Senate Approves Austerity Measures

In Athens, leaders of both main parties said they were finalizing details of a national unity government, part of European political efforts to step back from the brink of chaos.

The Italian Senate voted with unusual speed to approve the austerity measures, thus enabling the lower house to complete parliamentary approval of the package on Saturday. Opposition senators did not vote, allowing the legislation to pass by a margin of 156 to 12.

Mr. Berlusconi promised this week to step down once the measures were approved, permitting a new leader to be appointed as the head of a technocrat government.

Mario Monti, a former European commissioner, has been widely mentioned as a likely front-runner, and he could take over as early as Monday.

In Greece, following similar maneuvers to replace elected leaders with respected, veteran officials known for expertise rather than popularity at the polls, Lucas Papademos, the prime minister-designate chosen by the two main political parties, was set to announce his cabinet by early afternoon, although, throughout the process of replacing the former prime minister, George A. Papandreou, such deadlines have frequently slipped.

Initially expected at 2 p.m. local time, the announcement was put back for two hours and Greek media speculated that there was disagreement over the composition of a new cabinet. The delay was not officially explained.

Days of political turmoil roiled bond markets this week, pushing the cost of borrowing in Italy to levels that economists regard as unsustainable and adding to the pressures on politicians.

By one measure, though, the promised changes in Greece and Italy seemed to have calmed investors: the leading stock market indexes in Britain, France and Germany all posted modest gains in Friday trading.

At the same time, the White House seemed to be showing growing impatience with Europe’s efforts to prevent their debt crisis from plunging the entire global economy into retreat.

Late Thursday, President Obama called Chancellor Angela Merkel of Germany and Presidents Nicolas Sarkozy of France and Giorgio Napolitano of Italy.

Speaking at a meeting of Asia and Pacific Economic Cooperation countries in Hawaii, Timothy F. Geithner, the United States treasury secretary, said Thursday: “The crisis in Europe remains the central challenge to global growth.  It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.”

He also urged Asian and Pacific economies to take up the slack as Europe confronts slowing economic growth. “We are all directly affected by the crisis in Europe,” he said, “but the economies gathered here are in a better position than most to take steps to strengthen growth in the face of these pressures from Europe.” 

In Rome, to prolonged applause from other lawmakers, Mr. Monti took a seat in the upper house for the first time on Friday after he was appointed a senator for life. Mr. Monti has already held talks with President Napolitano and the speaker of the Senate, strengthening speculation that he is the leading candidate to succeed Mr. Berlusconi.

The legislation approved by the Senate is aimed at reducing Italy’s 1.9 trillion euro, or $2.6 trillion, public debt and boosting growth, but the European Union has already said that Italy will need to take further measures.

The proposed legislation includes selling 15 billion euros of state assets and increasing the retirement age to 67 from 65 by 2026. The new law also foresees a liberalization of closed professions and labor laws, a gradual reduction in government ownership of local services and tax breaks for companies that hire young workers.

Gaia Pianigiani reported from Rome, and Alan Cowell from London. Niki Kitsantonis contributed reporting from Athens.

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Greek Government Tries to Sell New Belt-Tightening Measures

Inspectors from the International Monetary Fund, the European Central Bank and the European Commission were to return to Greece next week after two teleconferences this week with the Greek government. The commission said that “progress was made” in the calls for an agreement to pave the way for the release of the next portion of aid, totaling €8 billion, or $10.9 billion.

On Wednesday, Finance Minister Evangelos Venizelos of Greece told Parliament before a cabinet meeting that extra measures would be needed to meet the targets set by the lenders. But he did not specify what they were and did not elaborate on a new property tax, proposed this month, or Greek media reports indicating there would be sharp wage and job cuts in the civil service.

“We are trying to find a solution that causes as little pain as possible,” he said. The government will do everything possible to keep the country “out of danger,” he added.

“We will not put the country’s very existence at risk over matters that account for half or 1 percent of G.D.P.,” he said. “The markets are blackmailing us and the circumstances are humiliating us.”

Other possible measures reportedly being discussed include raising taxes on heating oil tax and reducing the tax-free threshold for incomes.

Charles Jenkins, an analyst in London covering European Union for the Economist Intelligence Unit, said that word of progress being made in the negotiations “provides some short-term relief that an agreement will be reached” to enable Greece to meet its bills for the next two months.

“But even if this proves correct, further crises are likely as further tranches are required every two months,” he said.

Mr. Jenkins said it was far from clear whether the Greek government had the “capacity to enforce expenditure cuts or to increase its collection of taxes.”

The Greek prime minister, George A. Papandreou, was to meet his German counterpart, Chancellor Angela Merkel, for dinner and talks in Berlin on Tuesday, the German government announced.

Mrs. Merkel has been under pressure from skeptical lawmakers within her own coalition over the proposed enhancements to the E.U. bailout fund, the European Financial Stability Facility, which include powers allowing it to buy sovereign debt and support banks.

In Berlin, however, the lower house of Parliament’s finance committee backed the proposals Wednesday with a “big majority,” the deputy finance minister, Hartmut Koschyk, told Bloomberg News. The bill won support from the opposition but the coalition was able to pass it without their help, he said.

The budget committee was also due to deliberate the proposed changes to the E.U. bailout fund, before the bill goes to a full vote on Sept. 29.

Frank Engels, an analyst at Barclays Capital, said even if the rescue fund bill is passed by a very healthy majority in the Parliament, “German politics are likely to become even more volatile than before in the wake of the growing divergence” between Mrs. Merkel’s conservatives and her junior partner, the pro-business Free Democrats, “on matters related to the euro.”

The leader of the Free Democrats, who have suffered a series of stinging local election defeats recently, has been at odds with Mrs. Merkel over whether the possibility of a Greek default should be considered.

So far, Spain, France, Belgium, Italy and Luxembourg have ratified the July 21 deal on expanding the rescue fund. The rest are supposed to do so by early October, but there are indications from several countries, including Austria, Finland and Slovakia, that approval is likely to be delayed.

Austria’s parliamentary finance committee is scheduled to discuss the bill on Tuesday before a vote in Parliament on Sept. 30.

In Finland, Parliament is expected to vote on the bill next Wednesday. The government has been insisting on sticking to a provision in the July agreement under which it would receive collateral for its contribution — a clause that has proved divisive.

In Slovakia, Finance Minister Ivan Miklos said Monday that Parliament would vote on the plan by Oct. 11, Bloomberg News reported. But the government still lacks majority support for the overhaul within the ruling coalition parties.

The fall of the government in Slovenia on Tuesday threatens another delay.

The Dutch Parliament is scheduled to approve a supplementary budget, which includes the proposed rescue fund changes, in first week of October, a Finance Ministry spokesman, said Monday, according to Reuters.

Niki Kitsantonis contributed reporting from Athens.

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