Italian Austerity Details Appear As Monti Steps Up
Noting that the Italian political parties are aware of their responsibilities, new Italian PM Monti expects to complete his initial consultations tomorrow as Bloomberg reports having received a copy of a letter to the European Commission. Bloomberg notes that the letter expects 300,000 public sector job cuts, raising the retirement age quicker than other nations and a tax system overhaul. All credible moves, but we wonder just how this will jibe with the increasingly recession-prone deleveraging that seems likely to occur next quarter at the latest. It brings the ball squarely back into the ECB's hands as monetary saviors while the slow process of fiscal correction occurs - and as we have noted, we believe that another risk-off cluster is likely before the ECB will retract its words.
Bloomberg: Italy Letter to EU Pledges Public-Sector Job Cuts, Tax Overhaul
Italy plans to cut public-sector jobs, overhaul the tax system and introduce incentives for venture-capital investments, the Finance Ministry said in a letter to the European Commission.
Italy plans to raise its retirement age faster than other European Union countries and to cut 300,000 public-sector jobs by 2014, according to the letter, a copy of which was obtained by Bloomberg News.
The nation will also reduce income-tax brackets from five to three of 20 percent, 30 percent and 40 percent, according to the letter, which provided clarifications sought by the commission to a document delivered to the EU by former Prime Minister Silvio Berlusconi last month.
Italy will provide incentives to venture-capital investments in small- and medium-sized companies, while a reintroducton of a property tax called ICI could bring in an additional 3.5 billion euros in revenue, according to the letter.
Berlusconi resigned on Nov. 12, leaving the fate of Italy’s pledges to the EU unclear.
Here is the full statement to the EC: