TOUGH tax hikes and spending cuts were announced last night as Italy’s technocratic Prime Minister unveiled his plan to get the country’s colossal debts back under control.
The €20bn (£17.2bn) fiscal package was presented after a cabinet meeting.
The retirement age is set to rise, income tax on the rich will be hiked and a wealth tax on assets and property is also to be implemented.
Unions hit out at the plans, claiming they hit poorer workers and pensioners disproportionately hard.
However, the government has little choice as Italy’s national debt stands at €1.8 trillion or 120 per cent of GDP. Ten-year bonds finished last week with a yield of nearly 6.7 per cent, close to the seven per cent danger zone that tipped others into bailout territory.
Monti was appointed Prime Minister to get to grips with the budget and restore market confidence, after elected politicians failed to tackle the country’s deficit. Should Italy require a bailout, it may well overwhelm existing provisions for saving indebted countries, and would bring the Eurozone crisis to new heights.
As part of Monti’s reforms:
•Income tax will be hiked, largely targeted at higher earners;
•A new wealth tax will target property and other assets;
•To be entitled to a state pension, workers will have to contribute for a minimum of 41 years for women and 42 for men – up from 40 currently;
• Inflation indexing on pensions will be cut back.