The Italian Parliament approved the latest round of austerity measures, according to a report from ANSA. As I had posted, the over $50 billion in cuts and tax increases will balance Italy’s budget in 2013 instead of the originally-projected 2014.
As I have been posting, Italy, with its $1.8 trillion gross domestic product – the eighth largest in the world – has become the European Monetary Union’s firewall during its debt crisis. Because the Italian sovereign debt is 120% of its GNP, Italy’s debt load is the third or fourth largest in the world.
The acceleration of the balancing of Italy’s budget was strongly urged by the Monetary Union in order to restore confidence in the euro. The Monetary Union had pushed for a large tax increase on upper middle class and above incomes. I posted recently about this violation of sovereignty and Italy’s resistance to it.
The 3% income tax increase included in the measure, according to ANSA, will affect only those earning over $400,000 dollars – much less than what was originally proposed to satisfy the European Monetary Union. However, there will also be an increase in the Value Added Tax (the European version of a sales tax) from 20 to 21%, ANSA reports. Most of the austerity program is in the form of spending cuts, including reductions in bureaucracy, and greater efforts to collect unpaid taxes.
The focus in Italy will now turn to measures to increase economic growth, which has been sluggish. Growth is fiscally beneficial, as it leads to more revenue from taxes as people earn more.
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