Italy

The Markets like the further austerity measures


Published

Markets responded positively to the additional austerity measures Prime Minister Mario Monti and his Cabinet of technocrats agreed on Sunday which will save a further €30 billion over the next two years.

Italian ten year bond yields fell from 6.68% last week to 5.95% today and Milan stocks rose by 2.91%. Even Spain benefitted with the yield on 10-year Spanish bonds falling to 5.090% from 5.626% last Friday. The UK FTSE 100 rose 0.28 per cent to 5,567.96 points, the German DAX-30 rose 0.42% to 6,106.09 points and the French CAC-40 climbed 1.15% to 3,201.28 points.

The list of measures proposed by the Italian Cabinet as published by ANSA.it are outlined below:

Pension Reform
• Pensions above €936 will not be raised in line with inflation
• Retirement age for men will increase from 65 to 66, with incentives to work until 70 for both male and female workers
• Women’s retirement age will increase from 60 to 62
• Pensions will be determined based on the amount of money workers have contributed, as opposed to the current system which is based on salary levels at the time of retirement
• The minimum amount of contribution years to be able to retire before the retirement age will rise to 42 years for men and 41 for women, from 40 years currently.

Tax Reform
• Property tax dropped by the previous administration will be reintroduced, which will bring in or more than two thirds of the package, over €10 billion
• Taxes will be raised on luxury items like sports cars, yachts and private jets
• If necessary, there will be a 2% increase in value added tax in the second half of 2012, taking it up to 23% in the top band
• Income tax will not be raised.

Public Sector Reform
• Some public agencies will be eliminated
• Elected officials in provincial governments will no longer receive salaries and their staffs will be cut.

Market reform
• Stores will be given more flexibility in their opening and closing hours
• Antitrust powers will increase
• Rules on non-prescription drug sales will be liberalized
• Transport-sector regulations will be loosened.

Measures against tax evasion
• Small businesses and independent proprietors will receive tax breaks for fully declaring income
• Civil service will make transactions and payments electronically
• Cash transactions above €1,000 will be prohibited; the current limit is €2,500.

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