Remember how two months ago Greece came up with a bulletized list of austerity measures it would immediately if not sooner engage in to demonstrate its responsible adult behavior, funded by over €200 billion in European and American taxpayers funds and two bailouts? Well, since then we have learned that Greek GDP has plunged below even the worst case scenarios, even as the country has missed all deficit cut targets. Today, it is Italy's turn, which however apparently was confused and presented the list of austerity before it got a Greek-style rescue. Which is bad. Because within a few weeks we expect the strike (and riot)-cam to be planted firmly in the Piazza Navona and across the streets ot the Trastevere in capturing the latest round of European indignation, oddly enough not caused by local filming of The Jersey Shore. And now that the strawman is out there, when Italy actually needs the money, which will be soon, and is found to be in compliance with precisely zero of its Reps and Warranties (or kinda like a Bank of America RMBS prospectus) it just may make defrauding the middle that much more difficult.
Summary of Italian Austerity
- Cuts to the budgets of central government ministries, worth a total of 6 billion euros in 2012 and 2.5 bln in 2013.
- Funding to town councils, regions and provinces reduced by 6 bln euros in 2012 and 3.5 bln euros in 2013.
- Unspecified changes to the pension system to save 1 billion euros in 2012.
- A progressive increase in the retirement age of women in the private sector to 65 from 60 to begin in 2016, instead of 2020 as previously planned.
- The retirement funds of public sector employees will be withheld for two years after they leave their jobs.
- A reduction the "cost of politics" resulting in a halving of elected officials and around 55,000 fewer positions in the apparatus of central and local government. However, Berlusconi did not give a timescale for these cuts.
- Abolition of 34 of Italy's 110 provincial governments and the merging of town councils with less than 1,000 inhabitants. However, this measure will be "for the future" and not become effective during the government's current term of office, Berlusconi said.
- A "solidarity tax" on high earners, to be levied for two years, as an additional 5 percent on income above 90,000 euros per year and 10 percent on income above 150,000 euros.
- Increase in taxation of income from financial investments to 20 percent from 12.5 percent, excluding income from government bonds.
- Purchases worth more than 2,500 euros will no longer be allowed to be made in cash, as a means of curbing tax evasion. There will also be tougher penalties, such as suspension from professional bodies, for failure to issue receipts and invoices.
- All non-religious public holidays, such as the June 2 anniversary of the founding of the Italian Republic, will be celebrated on a Sunday in a bid to increase the number of working days in a year.
- A liberalisation of national labour contracts giving greater scope to strike accords at the company or local level.
Reuters' take on these latest promises scribbled on a non-binding piece of paper:
Italy's cabinet adopted sweeping austerity measures on Friday to cut the fiscal deficit by 45.5 billion euros and balance the budget in 2013, a year ahead of its previous schedule.
The measures, which were passed by emergency decree, must now be approved by parliament within 60 days. They come less than a month after parliament approved a previous austerity package, aimed at eliminating the deficit in 2014.
Rome promised to re-write and frontload its plans in response to a letter from the European Central Bank, which agreed to buy Italian bonds to arrest a huge market sell-off in exchange for faster fiscal consolidation and economic reform.
Austerity measures will now total 20 billion euros in 2012 and 25.5 billion in 2013, Prime Minister Silvio Berlusconi said at a news conference after the cabinet meeting.
Economy Minister Giulio Tremonti said the budget deficit will fall to 1.4 percent of gross domestic product in 2012 from 3.8 percent this year, and be eliminated in 2013.