December 5, 2011

Italy and Austerity: New Italian PM Floats $40B More in Cut Backs

Italian parliament to take up Monti’s legislation on pensions, property and luxury taxes

Mario Monti at a press conference in Rome. (Photo: AP) Mario Monti at a press conference in Rome. (Photo: AP)

Mario Monti, who replaced Silvio Berlusconi as prime minister, is calling on fellow Italians to accept legislation that would impose an additional 30 billion euros ($40 billion) in austerity measures on top of what has already been approved. He plans to take his proposal, already approved by his cabinet, to the legislature late Monday, and it could be voted on by Christmas.

Bloomberg reported that although Monti is advocating “shared sacrifices” that include measures that tie pensions to contributions instead of to a worker’s last salary, brings back property taxes and adds a tax on luxury goods, protesters are staging demonstrations to counter what they see as unfair burdens.

Former Prime Minister Silvio Berlusconi’s political party, People of Liberty, which is the largest in Parliament, is also disrupting Monti’s efforts. While the party said in November that it would back Monti, its support was restricted to the implementation of austerity measures that were announced before Berlusconi resigned Nov. 12. Berlusconi also said that his party is opposed to any new levy on wealth or high earners.

Monti has not provided details, but has said that the new austerity measures will eliminate some pension “privileges.” He added that he would give up his salary as premier and finance minister to show solidarity with Italians having to sacrifice under the program.

Edward Luttwak, a senior associate at the Center for Strategic and International Studies, a policy institute in Washington, said in the report, “You can’t choke the economy by imposing more taxes to keep paying [European Central Bank president] Mario Draghi’s pension. Draghi gets a ‘baby pension’ of about 15,000 euros a month from the Italian Treasury,” Luttwak said, and “only by cutting these ‘golden pensions’ will the government be in a position to be more rigorous with other people’s pensions.”

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