Italy approves 24 billion euro austerity drive

ROME, May 25 (AFP) – The Italian government has approved austerity measures worth 24 billion euros for 2011-2012 in a bid to stabilise public finances.

"The measures are centred on cuts to public spending," the government said in a statement late Tuesday after a cabinet meeting, adding that they also aimed at increasing revenues mainly by cracking down on tax evasion.

The measures, worth nearly 30 billion dollars, are aimed at helping cut the public deficit from 5.3 percent of gross domestic product in 2009 to 2.7 percent in 2012, bringing Italy into line with an EU limit of three percent.

Italian Prime Minister Silvio Berlusconi's close aide Gianni Letta had earlier warned of stern measures, stressing the need to make "very heavy, very hard sacrifices... to save our country from going the way of Greece."

(AFP file) Italy's Prime Minister Silvio Berlusconi delivers a speech at the Italian employers' federation in the city of Parma.

Civil servants will pay a high price in the austerity drive with their salaries frozen for three years while ministers and other highly paid government officials face wage cuts.

Average Italians were spared tax increases but the government is to hike tax on stock options and private sector executives' bonuses.

The battle against tax evasion is to be stepped up by involving local authorities to improve efficiency and there will be measures affecting the retirement age for some.

The plan was immediately denounced by Pier Luigi Bersani, the head of the opposition Democratic Party, as a package of "indiscriminate" cuts that "do not confront anything structural."

The package follows austerity measures in Spain, Greece, Portugal and Britain aimed at stemming a loss of market confidence in indebted European economies whose deficits soared during the global slump.

While Italy managed to keep its public deficit from spiralling sharply higher during the economic crisis, the country is saddled with one of the highest national debts in the world, much to the concern of financial markets.

Italy's debt hit 115.8 percent of gross domestic product last year.

However, because its deficit is lower than other struggling eurozone countries, economists consider Italy to be in a stronger financial position than Spain and Greece, which have also undertaken painful austerity drives.

Leader of the biggest Italian union, CGIL, Guglielmo Epifani, said that the measures were unfair because "the biggest sacrifices have to come from workers". He did not rule out a strike.

But the two other big Italian unions appeared to be in favour of the belt-tightening measures.

Other news