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 Italy crisis: Lower house to vote on austerity law

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Join date : 2011-02-03

PostSubject: Italy crisis: Lower house to vote on austerity law   Sat Nov 12, 2011 6:31 am

Poster in Rome calling on PM Silvio Berlusconi to resign - 11 November Mr Berlusconi has promised to resign after the vote is passed
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Global Economy

* What's the matter with Italy?
* How might Greece leave the euro?
* Eurozone crisis explained
* Euro deal at a glance

The lower house of Italy's parliament is due to vote on a package of austerity measures demanded by the EU and designed to restore markets' confidence in the country's economy.

The vote will pave the way for PM Silvio Berlusconi to resign.

A technocrat government led by ex-EU commissioner Mario Monti seems likely.

The Senate on Friday backed the plan, which includes a rise in the pension age, a fuel price hike and the sale of state assets.

Following the vote, shares in most European markets rose 2-3%, and the interest rate paid on Italy's 10-year bonds dropped.

IMF chief Christine Lagarde has welcomed the "significant progress" made in tackling the political crisis in Italy and Greece, where interim Prime Minister Lucas Papademos was sworn in at the head of a new cabinet on Friday.

"What we wanted at the IMF was political stability and a clear policy in both countries. I believe significant progress has been made," she said on Saturday during a visit to Tokyo.
Moving fast

Mr Berlusconi, who lost his parliamentary majority in a vote on Tuesday, has promised to resign after the austerity measures are passed by both houses of parliament.

On Thursday, President Giorgio Napolitano - whose role is largely ceremonial - said he wished to "dispel any doubt or misunderstanding" on when the prime minister would fulfil his promise to resign.

The lower house, the chamber of deputies, could complete its vote on Saturday, allowing Mr Napolitano to accept Mr Berlusconi's resignation as early as Saturday evening.
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image of Alan Johnston Alan Johnston BBC News, Rome

All that Mario Monti has said publicly is that there is a great deal to do and there has to be an end to privilege - a reference, really, to the way the political class here is seen as getting too big a share of the national cake.

The idea that politicians will have a lot of their benefits squeezed will play very well publicly, but Italy's problems go deeper than that. Everyone agrees the economy needs to be reformed, but the big question is how. If there is to be austerity, who should feel the pain most?

In the street, they would tell you it needs to be the rich: the financiers, the bankers, the tax-evaders. On the other side of the debate, there are people who would say the public sector workers have had it too easy for too long - that employers must be allowed to hire and fire people more easily if business is to be given a freer hand.

* Profile: Mario Monti

He could then formally ask Mr Monti or another candidate to form a government of technocrats.

Italy's leaders are desperate to signal that they can bring the country's finances under control, says the BBC's Alan Johnston in Rome, and they are moving fast.

Mr Monti, a well respected economist, is exactly the sort of man that the money markets would like to see take charge at this time of crisis, our correspondent says.

The austerity package foresees 59.8bn euros in savings from a mixture of spending cuts and tax rises, with the aim of balancing the budget by 2014. Measures include:

* An increase in VAT, from 20% to 21%
* A freeze on public-sector salaries until 2014
* The retirement age for women in the private sector will gradually rise, from 60 in 2014 until it reaches 65 in 2026, the same age as for men
* Measures to fight tax evasion will be strengthened, including a limit of 2,500 euros on cash transactions
* There will be a special tax on the energy sector

On Wednesday, the interest rate on 10-year Italian government bonds touched 7%, the rate at which Greece, Ireland and Portugal were forced to seek bailouts from the EU.

An EU team has begun work in Rome, monitoring how Italy plans to cut its crushing debt burden, 120% of annual economic output (GDP).

The Italian economy has grown at an average of 0.75% a year over the past 15 years.

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