Italy to raise VAT and add 3% levy to high incomes

ITALY’S centre-right government promised yesterday to hike VAT, as it bowed to market pressure for more action on its swollen debt and ignored mass street protests against its austerity measures.

With Italian bonds coming under renewed attack, Prime Minister Silvio Berlusconi met ministers as the senate began a debate, opening the way for approval of the €45.5 billion package today.

The air of crisis was heightened by anti-austerity rallies across the country after Italy’s powerful CGIL union called a one-day strike to protest against the programme, which includes a measure it says will make it easier to sack workers.