Italy and Spain pass austerity measures

Italy introduces measures to cut deficit by some $70bn, while Spain's Senate introduces constitutional budget limits.

    Italian Prime Minister Silvio Berlusconi's austerity measures were passed by 165-141 in the Italian Senate [EPA]

    Italy and Spain have passed new austerity measures as they battle to control their debts.

    The upper house of Italy's parliament agreed to introduce an austerity package which will cut its deficit by some $70bn (54bn euros) over the next three years.

    Protestors in Italy and Spain held a day of action against their government's latest austerity measures

    Spain's Senate passed a constitutional agreement to keep future budget deficits to a strict limit.

    The Italian Senate voted 165-141 to approve the measures, which the government had called as a confidence vote in order to speed its adoption in light of "the seriousness of the international financial crisis".

    The lower Chamber of Deputies will now vote on the measures, where Italian Prime Minister Silvio Berlusconi also has a majority.

    The value of the package increased from 45.5bn euros following hasty revisions prompted by markets concerned by a number of key provisions being eliminated due to political bargaining.
     
    Berlusconi's government backtracked on Tuesday and restored a number of those provisions, including a three per cent wealth tax.

    It also decided to raise the VAT sales tax and move forward pension reforms, despite a one-day general strike against the austerity package.

    The measures should help Italy bring its budget back into balance in 2013 instead of 2014.

    Tens of thousands of Italians took to the streets on Wednesday for a day-long strike against the measures, which include a rise in sales taxes and a revised wealth tax.

    Spanish debt limit

    Meanwhile, Spain's vote for a "golden rule" makes it the only country apart from Germany to have such a limit.

    The reform was widely expected to pass in the upper house as the Socialist government and the main opposition group, the centre-right People's Party, were both in favour and the lower house has already overwhelmingly approved it.

    Moves come amid a mood of increasing urgency within the eurozone to act to solve the debt crisis [Reuters]

    Some legislators walked out of the upper house in protest - 233 senators of 262 voted for the reform, three voted against - while others did not attend the session.

    The reform forces Spain to keep its structural deficit within limits established by the European Union, although it allows exceptions in case of natural disasters, a recession or emergencies.

    On Tuesday, thousands of union workers marched peacefully in Madrid to protest against the constitutional reform, which they said was being rushed through without sufficient public consultation and threatens social programmes.

    The Spanish reform comes at a time of high political tension across the eurozone.

    Also on Wednesday, Germany's highest court ruled that aid for Greece and other rescue packages is legal. 

    But it also said parliament must have a greater say in any future bailout.

    And in another sign of movement, Greece stepped up its deficit reduction plans in the face of accusations it was stalling and France approved a 12bn euro package of budget savings, largely by clamping down on tax breaks.

    SOURCE: Agencies


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