Further €45.5 billion cuts on the way
The Italian cabinet approved a further €45.5 billion in cuts yesterday following demands by the European Central Bank (ECB) which began buying Italian bonds last week.
Finance Minister, Giulio Tremonti, has said that the measures will reduce the budget deficit from 3.9% of GDP to near zero by 2013.
Although the Cabinet has agreed the measures, they still have to be passed by parliament within the next 60 days and are in addition to the €47.9 billion of cuts approved by parliament in July.
The cuts include:
• A ‘solidarity’ tax for two years on high earners at 5% for those earning above €90,000 and 10% for those earning above €150,000 per annum
• An increase in capital gains tax from 12.5% to 20%
• Purchases more than €2,500 will no longer be allowed to be made in cash to stop tax evasion
• Cuts in the budgets of ministries and central government of €6 billion in 2012 and €2.5bn in 2013
• Civil servants severance pay to be delayed by 2 years
• Politicians salaries to be cut and MPs to travel in economy
• A hit on pensions of €1bn as yet undisclosed
• Women’s retirement age to be raised from 60 to 65 starting in 2016 rather than 2020
But perhaps the largest cuts are those which are to be made to local government:
• Town hall budget cuts of €6bn in 2012 and €3.5bn in 2013
• A halving of elected officials, totalling jobs losses of around 55,000
• Of 110 provincial councils, 36 will go
• Councils with less than 1,000 inhabitants will be merged. That means 1,500 councils out of 8,000 will be affected.
The announcements were made by Prime Minister Silvio Berlusconi who described the cuts as personally painful. A further announcement today by the Finance Minister will give more details.