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Italy government calls confidence vote on austerity
December 15, 2011 / 12:56 PM / 6 years ago

Italy government calls confidence vote on austerity

ROME (Reuters) - Italy’s government has called a confidence vote in parliament on Friday to speed up approval of a 33-billion euro ($43 billion)austerity package intended to restore market confidence in the euro zone’s third largest economy.

Minister for Parliamentary Relations Piero Giarda announced the confidence vote, expected early on Friday afternoon. It will likely be followed by a similar vote in the upper house next week.

The technocrat government of Prime Minister Mario Monti is backed by an overwhelming majority in both houses and the votes should pass easily, confirming a decree law that went into effect on December 4 but needed parliamentary approval within 60 days.

Monti’s government was appointed last month to face a collapse in market confidence that had put Italy at the heart of the euro zone debt crisis. He has raced to push through the law that cuts spending and increases taxes to shore up public finances and cut a debt running at 120 percent of gross domestic product.

The government resorted to confidence votes to curb debate on dozens of amendments, many of them tabled by the opposition Northern League.

This strategy also enables the broad swathe of parties supporting Monti from both left and right to gloss over their opposition to parts of the law in the interest of keeping the emergency government in power.

Monti’s predecessor, Silvio Berlusconi, had called for a confidence vote, saying his PDL party -- the biggest in parliament -- would support the government out of a sense of responsibility, not because it agrees with all the sacrifices being asked of Italians.

LOSS OF CONFIDENCE

The scandal-plagued Berlusconi’s persistent failure to pass previous austerity measures was part of the reason that markets lost confidence in Italian debt and drove borrowing costs to levels that would be untenable in the long term.

The Northern League heckled Monti in parliament on Wednesday and held up placards saying, “This is not a budget, but a hold-up.” On Thursday, they tried to obstruct the calling of the confidence vote by filibustering in the chamber before speaker Gianfranco Fini cut them short.

The League had been Berlusconi’s biggest ally in the centre-right government, which was forced out amid market pressure.

Both Berlusconi’s PDL and the centre-left Democratic Party have misgivings about parts of the bill but cannot sabotage the government for fear of unleashing an economic catastrophe that probably would lead to a default.

Underlining the depth of Italy’s crisis, the main employers’ lobby Confindustria on Thursday slashed its growth forecast for Italy next year to minus 1.6 percent from a previous estimate of plus 0.2 percent and said the country was already in recession.

It said even this pessimistic forecast was based on Italian bond yields dropping to below 5 percent by April compared to higher than 7 percent now -- the level at which Ireland, Greece and Portugal were forced to take bailouts.

Such a rescue for the much bigger Italian economy would overwhelm Europe’s defenses, which is why the country is in the frontline of the euro zone crisis.

Confindustria leader Emma Marcegaglia said the euro could collapse if European countries did not encourage growth instead of concentrating only on balancing their budgets as demanded by Germany.

Italy’s trade unions, who strongly oppose cuts to pensions under Monti’s plans, have staged a series of protest strikes that will continue into next week. On Wednesday Susanna Camusso, head of the biggest union federation, said the government could cause a “social explosion” with its policies.

She said a slight softening of the package through amendments proposed by Monti on Tuesday was insufficient, and accused him of sparing the rich and imposing excessive sacrifices on ordinary Italians.

Reporting By Catherine Hornby and Steve Scherer, writing by Barry Moody, editing by Michael Roddy

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