The Italian Parliament Approves Monti’s “Save Italy” Fiscal Reforms

    
     The Italian Parliament has approved Prime Minister Mario Monti’s proposed $40.5 billion worth of fiscal and economic reforms. The reforms are intended to reduce Italy’s debt while stimulating economic growth.

     As I have been posting, Italy had passed several rounds of austerity measures under Monti’s predecessor, Silvio Berlusconi, but has come under increased pressure by the European Union to do more both to cut its debt and to spur economic growth, as Italy, with its eighth-largest gross domestic product in the world, is the Eurozone’s firewall. It is on track to reduce its debt by 2013 or 2014, but suffers from meager growth, which has contributed to the lack of investor confidence in Italy’s ability to avoid defaulting on its debt. 

     According to ANSA, the new measure, dubbed by Monti the “Save Italy” program, includes several measures intended to reduce debt, including a tax increase on luxury items and homes, an increase of the value added tax (Europe’s version of sales tax) and gasoline tax, and a crackdown on tax evasion. There will also be pension reform, the elimination of several government agencies and provincial government spending cuts, ANSA reported. Leading by example, Monti is personally giving up his salaries as Prime Minister and Minister of the Economy, according to the Italian news agency. On the economically stimulative side, ANSA also reports that there will be some deregulation and tax cuts for investors in Italian businesses and for businesses that hire the young and women and that declare their incomes fully (another anti-tax evasion measure), or that make energy-saving renovations or invest in infrastructure.

     Berlusconi’s center-right party, the largest in parliament, supported his successor’s proposal, as did the center-left and some in the center, with the Northern League being the most vociferous in opposition. ANSA reports, however, that Berlusconi has threatened to withdraw his party’s support of Monti if there are any more tax increases. 

     Monti had announced ahead of time that following the passage of this further round of austerity, he will propose more measures that will be focused strictly on increasing economic growth.