ROME (MNI) – Italy’s Prime Minister Mario Monti told lawmakers
Monday that there is no alternative to the E30 billion package of
spending cuts and tax increases his government is introducing, because
failure to rein in the country’s public debt would push Europe’s
third-largest economy into “the abyss.”

“These painful measures contain the seeds for the creation of an
Italy that will guarantee the future of our children, a European Italy,”
Monti said while presenting his proposed package in the lower house of
parliament here. “We need to use all our energy to pass structural
reforms that will address what is curbing economic growth.”

He added: “If we don’t make these sacrifices today, we will need to
make even heavier ones in coming days and weeks.”

Monti said the measures, intended to regain the country’s
credibility in financial markets, were “just the beginning” and that his
government would do whatever was needed. He added that Italy had no
choice but to remain in the “common house of Europe and the euro,”
because the alternative was poverty and stagnation.

The measures introduced by Monti’s government, just 17 days after
he was appointed to steer Italy away from bankruptcy, include E13
billion worth of spending cuts and E17 billion in new tax revenue. They
include reductions in pension outlays and a streamlining of expenditures
related to the operations of regional and other local governmental
bodies. New revenue is expected to come from the re-introduction of a
tax on primary residences, increases in petrol taxes, a stamp duty on
all financial transactions, and a luxury tax on large boats, top-end
automobiles and private airplanes.

Additional measures include a 1.5% tax on Italians who benefited
from a recent tax amnesty for repatriated capital. The government may
also increase value added tax to 23% from the current 21% in the second
half of 2012 should savings above and beyond the previous government’s
targets — E4 billion euro in 2012, E12 billion euro in 2013, and E4
billion euro in 2014 – not be achieved.

Monti said he hoped that Italy’s cost of borrowing would decline,
after exceeding 7% in recent weeks — the level at which Greece, Ireland
and Portugal were forced to seek EU bailouts. At one point late last
month, borrowing costs on 2-year money hit 8%. Monti said in order to
tranquilize financial markets it was key not only to address the public
debt issue, but also to ensure that the government honors its promises.

“Only three months differentiate Italy from Greece,” Monti said,
stressing the urgency of the measures he is proposing to the parliament.

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