Italy seeks final approval for austerity plan

By Frances D'emilio

Associated Press

Published: Wednesday, Sept. 14 2011 10:10 a.m. MDT

Italian Finance Minister Giulio Tremonti, left, gestures during a confidence vote at the Lower Chamber in Rome, Wednesday, Sept. 14, 2011. Italian lawmakers were debating the government's austerity package Wednesday ahead of a final vote on the measures that aim to fend off a financial crisis. The package aims to reduce the country's deficit by more than euros54 billion ($70 billion) over three years through budget cuts, tax hikes and changes to the country's costly pension system. Italy's deficit to GDP ratio now stands at 120 percent, one of Europe's highest.

Mauro Scrobogna, LaPresse) ITALY OUT, Associated Press

ROME — Italy's government won a confidence vote Wednesday to push forward its controversial austerity package and fend off a financial crisis that could endanger the entire 17-nation eurozone.

The package, which has been changed several times amid fierce coalition infighting, is set to receive final parliamentary approval later in the day.

It aims to reduce Italy's deficit by more than €54 billion ($70 billion) over three years through budget cuts, tax hikes and changes to the country's costly pension system. Italy's deficit-to-GDP ratio now stands at 120 percent, one of Europe's highest.

The government, which had called the confidence vote in the lower house of parliament to stifle debate and speed up approval, won the vote 316-302. Premier Silvio Berlusconi's conservatives hold a majority in parliament. However, if a government loses a confidence vote, it must resign.

A final vote on the package, which has already been cleared by the Senate, is scheduled for Wednesday evening.

Italy has come under severe pressure in financial markets because of its high debt levels and poor growth. On Tuesday, the Italian Treasury raised €3.86 billion ($5.27 billion) from the sale of five-year bonds, but it had to pay an interest rate of 5.6 percent — a euro-era record high for Italy.

The debt problems of Italy, the eurozone's No. 3 economy, deepened fears across Europe over the health of the 17-nation eurozone and its vulnerability.

"The attack of the markets against Italy is a head-on assault on the entire eurozone," said German Vice Chancellor and Economy Minister Philipp Roesler, in Rome for talks with Italian Cabinet ministers.

Roesler praised the Italian government for putting together the austerity package, especially given the political difficulties in pulling it off, and called the accomplishment important "not just for Italy but the entire eurozone." The German praised Berlusconi's government in particular for committing to achieving a balanced budget by 2013.

Berlusconi had talks with EU officials in Brussels and Strasbourg earlier this week to reassure them of his government's determination to balance the budget. On Wednesday, he met with Wang Gang, the vice chairman of China's main government advisory body, amid speculation that Italy is trying to persuade Beijing to invest heavily in its industries.

Italy's industry minister, Paolo Romani, told reporters that he "can't rule out the purchase of European government bonds by China," the Italian news agency LaPresse reported. "But it will be the Chinese economic system to decide how and when to invest."

Berlusconi has come under criticism for his handling of the crisis, and because of the sex scandals that have plagued the 74-year-old's latest stint in power. Reported policy disputes with Finance Minister Giulio Tremonti and coalition infighting over the austerity package have added to the doubts surrounding the government's stability.

Critics say a weakened Berlusconi does not have the necessary authority to pass the reforms necessary to stem the crisis, and have called for his resignation.

The premier has dismissed any such suggestion, and defended his government's handling of the crisis. He has vowed to serve out his five-year term, which ends in 2013.

Alessandra Rizzo contributed to this report.

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