Italian senate approves austerity measures

ITALY’S senate last night approved the government’s disputed austerity package, aimed at reducing the country’s deficit by more than €54 billion over three years.

The upper chamber voted 165-141, with three abstentions, to approve the package, which was put to a confidence vote to ensure Premier Silvio Berlusconi’s allies united behind him after weeks of bickering over details of the plan.

Had the vote failed, Berlusconi would have been forced to resign, a prospect legislators clearly wanted to avoid, given the nervousness with which financial markets have viewed Italy’s ability to rein in its debt.

The European Central Bank had demanded stiff austerity measures to calm the markets. It has spent billions over the last month buying up Italian government bonds to get Italy’s borrowing costs lower and help it avoid becoming the next eurozone nation to need a bailout.

The package now goes to the lower Chamber of Deputies, where Berlusconi also maintains a majority.

Finance minister Giulio Tremonti’s office confirmed that the final changes in the plan, including pension reform that had been resisted by Berlusconi’s coalition allies, significantly increases the dent in Italy’s deficit. Italian media reported the latest new taxes and spending cuts totalled €4bn.

Antonio Azzollini, the head of the senate’s budget committee and a member of Berlusconi’s party, said VAT would be raised from 20% to 21%, an additional income tax of 3% would be levied on incomes exceeding €300,000, and the timetable for raising the retirement age for women would be speeded up from 2016 to 2014.

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