The Markets like the further austerity measures
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:
• 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.
• 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.
• 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.